Dodd punts on fiduciary requirement for brokers

Feb 25, 2010 @ 10:59 am

By Jessica Toonkel Marquez

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Senate Banking Committee chairman Christopher Dodd, D-Conn., is expected to introduce new financial reform legislation next week that excludes applying a fiduciary standard to brokers offering investment advice.

The provision was circulated two weeks ago by Sen. Tim Johnson, D-S.D., a Banking Committee member. Rather than classifying certain brokers as registered investment advisers, Mr. Johnson's proposal would require the Securities and Exchange Commission to conduct a study of regulatory standards for brokers and advisers, then propose rules on the issue.

Scrapping the fiduciary requirement will only hurt investors, said Knut A. Rostad, chairman of The Committee for the Fiduciary Standard, a group formed last year to promote higher standards for financial advisers. “Studying this issue is a straw man,” Mr. Rostad said. “There has been so much study that has been done over the past 15 years that the SEC has become a think tank on the issue of fiduciary issues. But the industry needs to explain why these investor protections should not be afforded to their customers.”

Kirsten Brost, a spokeswoman for the Senate Banking Committee, did not immediately return a call for comment.

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