The Securities and Exchange Commission’s (SEC) long-awaited study on fiduciary standards calls for adoption of a uniform fiduciary standard of care for broker-dealers (B/Ds) and investment advisers.
Back in July, H.R. 4173 (aka the Dodd-Frank bill) called for the SEC to carry out the study to examine whether to institute a uniform fiduciary standard.
The fiduciary standard requires advisors to put the customer’s interests first when providing investment advice. Investment advisors are already subject to this standard. B/Ds are currently held to another standard — a suitability standard requiring them to provide advice and products most suited to the customer.
The study not only recommends extending the fiduciary standard to include B/Ds. It also recommends “harmonization” of B/D and investment adviser regulatory regimes, to enhance their effectiveness in the retail marketplace.
These recommendations have drawn sharp criticism both from those inside and outside the SEC. In fact, two SEC commissioners — Kathleen L. Casey and Troy A. Paredes — both objected strongly to the report. The National Association of Insurance and Financial Advisors (NAIFA) has also voiced concerns about the staff recommendation for a uniform fiduciary standard, saying it will increase B/D costs and liability.
The Financial Planning Coalition, on the other hand, has applauded the study and urged the SEC to move forward quickly with its recommendations, saying “investors expect and deserve advice that is in their best interests, regardless of who is providing the service.”
According to the Report, a Uniform Fiduciary Standard would:
Do you think brokers should be held to the same standard as investment advisors?
Or do you think the standard of suitability is enough to protect consumers?