SEC Study Favors Fiduciary Standard for Brokers Too!

  • Date: January 27, 2011
  • Source: Admin

A Securities and Exchange Commission (SEC) study recommends that the same fiduciary standard be applied to brokers and financial advisers, according to a published media report.  But the SEC’s two Republican members argued that the study did not present enough evidence to support such a conclusion, according to the report, published Saturday on the Wall Street Journal’s web site.  

The bone of contention is whether brokers should be held to the same fiduciary standard that already governs investment advisers.  The fiduciary standard requires investment advisers to put their clients’ interests before their own. But brokers must only make sure that the products they sell are suitable for clients. The Dodd-Frank financial reform legislation says that the SEC can hold brokers to the fiduciary duty standard.  According to the report, the two Republican commissioners, namely Kathleen Casey and Troy Paredes were not opposed to establishing a common fiduciary standard for brokers and advisers, but wanted the SEC to do more work to demonstrate that such a change would not hurt investors.

A lot is in the public domain about the standards to which financial advisers are held, in the context of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which included a provision requiring the SEC to study the oversight of brokers and registered investment advisers (RIAs). Brokers oppose the fiduciary standard, because it will be costly to implement and leave certain lower-end consumers without an affordable choice.

But there is a way out of this stalemate.  If the consumer is in the market for a financial product and knows what he wants to buy, he can approach the broker.  If he is looking for advice in his best interests, he should look for a fiduciary.




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