Founder and former CEO of Vanguard Group Inc. John Bogle is not about to let the effort to adopt a fiduciary standard lie dormant on the SEC floor.
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He says that most institutions do what’s good for them instead of what’s in the interests of those who invest in their funds.
He is pushing SEC chief Mary Schapiro to press harder for the regulatory body’s commissioners to propose a fiduciary standard that would also apply to advisors to registered investment companies.
Schapiro relented yesterday to the fact that there is little likelihood a rule will be created before the end of the year, especially with the presidential election so close and concerns about the fiscal cliff taking precedence.
Bogle was one of a group of industry leaders who met with Schapiro on Tuesday September 11 to regroup on a plan to follow the recommendation of the Dodd-Frank Act to enact a rule that would bring both registered reps and mutual fund advisors under the same fiduciary standard by which registered investment advisors are governed.
The Investment Company Act of 1940 mandates that mutual funds be organized and managed with the interests of shareholders at the forefront. The interests of managers and directors should be secondary.
Bogle points out that the fiduciary standard is contained within the Act but that it is not enforced.
Those who met with Schapiro yesterday presented a Fiduciary Declaration that calls on the SEC to move forward with regulation that clarifies the differences in standards of care between brokers and investment advisors.
Investment advisors are mandated to place the client’s interests first in offering investment advice; brokers can recommend any product they wish as long as it is deemed to be within the client’s stated goals.
The declaration also stipulates that the Department of Labor should impose a fiduciary standard on any advisor who provides investment advice to retirement plans or retirement plan participants.
Those who met with Schapiro yesterday say it is a regulatory gap
that provides uneven protection to investors.
Those who signed the Fiduciary Declaration include Bogle, former Federal Reserve chairman Paul Volcker, former SEC chair Arthur Levitt, president of the Institute for the Fiduciary Standard Knut Rostad, Nobel Prize winning behavioral economist Daniel Kahneman, and former chair of the FDIC Sheila Bair.