Fiduciary duty for brokers would oppress, not protect

Oct 18, 2009 @ 12:01 am

As an attorney who frequently advises brokers, broker-dealers and financial advisers, I read the article “Debate over fiduciary duty heats up,” which appeared in the Oct. 5 issue, with interest and some dismay.

Extending the investment adviser's full-blown fiduciary duty to brokers acting in non-discretionary accounts — i.e., merely those who “recommend” purchases — is fraught with so much potential mischief that it undoubtedly has the plaintiff's securities bar rubbing their already sweaty palms together with glee over the prospects.

A broker is a broker, and an adviser is an adviser. If brokers are now going to have the same fiduciary duties that advisers have, simply because they render some adjunct “investment advice” when they make recommendations, there is no telling where the liability will stop.

Brokers who charge a commission only, who garner no fee for financial planning or managing even part of a client's affairs, will find themselves embroiled in far-flung lawsuits and arbitration hearings that no one in their right mind could envision, all under the banner of “breach of fiduciary duty.”

Frankly, it is fiction to suggest that anyone could possibly hope to set the lines at something approaching guidance under the circumstances that the Securities Industry and Financial Markets Association is proposing, much less what the Obama administration has in mind. Ultimately, the logical conclusion of all this will of course will be “one size fits all.”

This de facto standard will en-snare brokers in an ever-expanding web of vague “fiduciary obligations,” which neither benefit the investing public nor give the industry's brokers a fighting chance to avoid the “fall guy” role that everyone seems to be searching for in the wake of the Madoff debacle.

Hopefully, we will come to our senses and realize that the overwhelming majority of brokers are hardworking, honest people with their clients' interests in mind — without the need for new obligations which oppress but don't protect.

David A. Genelly


Vanasco Genelly and Miller


Key issue in industry: How advisers are paid

The Oct. 5 Other Voices column by Michael Chamberlain, “Let's call a spade a spade and a salesperson a salesperson,” is a perfect example of why we can't have civilized discussions anymore.

People tend to be so one-sided that they only want to alienate anyone who doesn't agree with them.

Mr. Chamberlain did just that when he resorted to name-calling to try and make a point.

A salesperson is simply a person who sells a product or service, and that pretty much sums up the bunch of us: investment adviser representatives and broker-dealer reps. Whether you are selling advice or selling products, you are selling.

The major difference is in how we are paid. (How many of us have ever told a client: “Over the next five to 10 years, you will pay me significantly more than you would a broker-dealer representative”?).

You can't regulate or give a title to the Bernard Madoffs of the world. You can slow them down, and you can make it more difficult for them to operate.

However, if someone wants to cheat, they are going to cheat. It doesn't matter what title is placed after the comma on their business card.

I think that we all could better serve the investing public if we were more concerned with the name before the comma on our business card than with the title after it.

David King


Rogers Financial Group

Greenville, S.C.


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