SEC Fiduciary Standard for Brokers Faces Delay
The SEC recommended a uniform fiduciary standard of conduct for broker-dealers and investment advisers in January 2011. Investment advisers and broker-dealers are regulated extensively under different regulatory regimes, but many retail investors do not understand this and are confused by the roles played by investment advisers and broker-dealers.
SEC Chairman Mary Schapiro’s pending departure in December will further delay finalization of these investor protections. She raised concerns as early as 2009, in a letter to broker-dealer CEOs stating that some enhanced compensation arrangements could induce brokers to engage in conduct that is not in investors’ best interest. She reminded CEOs that they have an obligation to police for such conflicts. Click on the link for the full SEC letter to broker-dealer CEOs.
According to a recent Reuters article, “… at issue are the varied rules that apply to different types of financial advisers. Financial advisers who register with the SEC must act as fiduciaries, or in their clients’ best interests. But brokerage firm advisers, who register with the industry’s private regulator, the Financial Industry Regulatory Authority, only have to suggest investments that are “suitable,” based on factors such as a client’s age and risk tolerance.” Click on the link to read the full article titled, “Schapiro’s exit leaves broker fiduciary plan up in air.”
The agency’s goal is to achieve no less stringent requirements for broker-dealers than currently apply to investment advisers under the Advisers Act when those financial professionals provide personalized investment advice about securities to retail investors.
The SEC’s 2011 study on the topic “recommends that the Commission . . . adopt and implement, with appropriate guidance, the uniform fiduciary standard of conduct for broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers.” The standard, according to the study, should be “no less stringent than currently applied to investment advisers under [the] Advisers Act.”
Click on the link to read the January 2011 SEC Study on Investment Advisers and Broker-Dealers.
Fort Lauderdale Securities Litigation and Arbitration Attorney
Contact Fort Lauderdale securities litigation and arbitration attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. He is an experienced securities litigation and arbitration attorney, and is available to assist individual investors, brokers, and brokerage firms involved in securities matters. You can reach him at 954-321-0176 or online.
