Pennsylvania + Wall



 

Pennsylvania + Wall provides commentary on a broad range of current financial, economic and regulatory reform topics. The views expressed are those of the authors, and do not necessarily reflect the position of SIFMA.

January 11, 2013

An Unnecessary Re-litigation of Fiduciary

By Ira Hammerman

Fiduciary duty - handshake

It seems as though we continue to re-litigate the past on one of Dodd-Frank’s most thoroughly debated provisions—the uniform fiduciary standard of conduct for brokers and investment advisers who provide personalized investment advice about securities to individual retail investors.

Under Section 913 of Dodd-Frank, Congress instructed the Securities and Exchange Commission to study the feasibility of imposing a uniform fiduciary standard on both brokers and investment advisors.  If the SEC deemed it appropriate, the Commission was granted discretion to write a standard that was no less stringent than the current fiduciary standard applicable to investment advisers under the ’40 Act. The SEC’s Section 913 efforts remain a work-in-progress.  

Yet, some in the investor advisor community want to continue to debate the issue and continue to play politics instead of working with the broker community to help the SEC establish a standard that is, indeed, no less stringent, than the current fiduciary standard for investment advisors. 

So, let’s clear the air about a few things.

First, SIFMA has been a consistent advocate for a uniform fiduciary standard of conduct since before legislation was even drafted in Congress.

Second, we are not advocating for a standard that is weaker than the current fiduciary standard. The Dodd-Frank statute empowered the SEC to create a standard that is “no less stringent” than the current fiduciary standard. So, the SEC has no discretion to create a weaker standard. Additionally, if Congress wanted brokers to fall under the 40 Act, they would have put that into Dodd-Frank. In fact, the Senate originally included that precise language, but in the conference committee it was discarded for what is now Section 913. Indeed, Barney Frank, himself, wrote to the SEC saying that Dodd-Frank was not meant to direct the SEC to impose the 40 Act on brokers.

Third, some investment advisors continue to debate this already settled issue because they want to distract the public from a plain truth.  They want the status quo. They want the current sparse regulation and guidance regarding fiduciary duty under the ’40 Act, and even less frequent examinations by the SEC. Currently, investment advisors only see a regulator about once every 11 years. Brokers, who are examined about every other year by FINRA, welcome this new fiduciary standard and are already accustomed to the heightened oversight. Investment advisors do not welcome it, and will try and distract the press and the public from that fact.

After years of debate and confusion, brokers and investment advisors finally agree that a fiduciary standard should be placed on those who provide personalized investment advice about securities to individual retail customers. Too bad some would prefer to continue to re-litigate the past and not work together, constructively, on behalf of individual investors across the country, to come to a fiduciary standard that puts investors’ best interests forward without sacrificing the products and services those investors want.

Ira Hammerman
Senior Managing Director and Associate General Counsel
SIFMA

 

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An Unnecessary Re-litigation of Fiduciary

(Public Policy, Private Client) Permanent link

By Ira Hammerman

Fiduciary duty - handshake

It seems as though we continue to re-litigate the past on one of Dodd-Frank’s most thoroughly debated provisions—the uniform fiduciary standard of conduct for brokers and investment advisers who provide personalized investment advice about securities to individual retail investors.

Under Section 913 of Dodd-Frank, Congress instructed the Securities and Exchange Commission to study the feasibility of imposing a uniform fiduciary standard on both brokers and investment advisors.  If the SEC deemed it appropriate, the Commission was granted discretion to write a standard that was no less stringent than the current fiduciary standard applicable to investment advisers under the ’40 Act. The SEC’s Section 913 efforts remain a work-in-progress.  

Yet, some in the investor advisor community want to continue to debate the issue and continue to play politics instead of working with the broker community to help the SEC establish a standard that is, indeed, no less stringent, than the current fiduciary standard for investment advisors. 

So, let’s clear the air about a few things.

First, SIFMA has been a consistent advocate for a uniform fiduciary standard of conduct since before legislation was even drafted in Congress.

Second, we are not advocating for a standard that is weaker than the current fiduciary standard. The Dodd-Frank statute empowered the SEC to create a standard that is “no less stringent” than the current fiduciary standard. So, the SEC has no discretion to create a weaker standard. Additionally, if Congress wanted brokers to fall under the 40 Act, they would have put that into Dodd-Frank. In fact, the Senate originally included that precise language, but in the conference committee it was discarded for what is now Section 913. Indeed, Barney Frank, himself, wrote to the SEC saying that Dodd-Frank was not meant to direct the SEC to impose the 40 Act on brokers.

Third, some investment advisors continue to debate this already settled issue because they want to distract the public from a plain truth.  They want the status quo. They want the current sparse regulation and guidance regarding fiduciary duty under the ’40 Act, and even less frequent examinations by the SEC. Currently, investment advisors only see a regulator about once every 11 years. Brokers, who are examined about every other year by FINRA, welcome this new fiduciary standard and are already accustomed to the heightened oversight. Investment advisors do not welcome it, and will try and distract the press and the public from that fact.

After years of debate and confusion, brokers and investment advisors finally agree that a fiduciary standard should be placed on those who provide personalized investment advice about securities to individual retail customers. Too bad some would prefer to continue to re-litigate the past and not work together, constructively, on behalf of individual investors across the country, to come to a fiduciary standard that puts investors’ best interests forward without sacrificing the products and services those investors want.

Ira Hammerman
Senior Managing Director and Associate General Counsel
SIFMA

 

Posted by Ed Shovar at 06/13/2013 12:50:09 PM | 


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