Effort For Uniform Fiduciary Standard Gets Pushed Aside As Presidential Election Looms And 2012 Winds Down

Tuesday, September 11, 2012 07:01
Effort For Uniform Fiduciary Standard Gets Pushed Aside As Presidential Election Looms And 2012 Winds Down

Tags: Dodd-Frank | registered reps | regulation | sec

SEC chair Mary Schapiro has recently had to put aside two proposals about which she has been particularly zealous.

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The first was her effort to get an interim rule in place that would have allowed private funds to advertise to the investing public although investors would still have to qualify as accredited.
The second is the effort to bring registered reps under the same fiduciary standard as investment advisors. This second effort has been two years in the making and became part of the Dodd-Frank Act as a result of Schapiro’s efforts.
But 2012 is coming to a close and no action has been scheduled. It has proven to be one of the most controversial and highly commented on proposals in the entire Dodd-Frank regulatory overhaul.
Apparently, Dodd-Frank did not mandate such a rule but instructed the SEC to consider mandating that brokers be brought under the same standards as investment advisors.
Since the rule itself is not a mandate, its fate could be subject to the results of the presidential election in November. Schapiro is being pressured to get a rule in place by those who feel the change is needed.
She meets on Wednesday with a group of industry advocates that is expected to announce a fiduciary declaration signed by former regulators including former Fed chief Paul Volker, former SEC chair Arthur Levitt, and Vanguard Group Inc. founder John Bogle.
A 2011 report issued by the SEC said investors are confused and don’t know the difference in a broker and an investment advisor. It recommended a fiduciary standard that would apply to both and that would ensure the client’s interests would be put above profits or other interests.
Schapiro says the creation of the standard is a priority and said in December that it is difficult to justify two different standards for the same type of advice.
Of course, investment advisors would argue that the reason there are two different standards is that brokers and investment advisors do not offer the same kind of advice.
That seems to be the crux of the argument among industry participants and that, as much as political pushback, is probably the reason it’s taking so long to get such a standard in place.


Comments (2)

Wait, wait wait!!! Lisa, Lisa, Lisa!!!

There is a universal standard, just brokers are exempt.....

I would argue that if you are not accountable, its not advice.

The brokers / FINRA have done a great job framing this, don't fall for it Lisa!!!!!


brentb843 , September 12, 2012
Hi, Brent. To clarify, investment advisors and brokers currently 'operate' under two different standards - one is a fiduciary standard, the other is not. This does not negate the fact that there is a single fiduciary standard from which brokers are exempt.

It's the effort of brokers not to become subject to the fiduciary standard that's holding up the uniform application of the existing standard...better?
lisagray , September 12, 2012

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