Key Republican may push for broader fiduciary standard

Collins' amendment to financial reform legislation in Senate could go beyond House provision

Apr 30, 2010 @ 2:44 pm

By Mark Schoeff

+ Zoom

As Senate floor debate on financial regulatory reform begins, a key Republican senator could revive the push for a broad fiduciary standard for broker-dealers.

Sen. Susan Collins, R-Maine, plans to offer an amendment on fiduciary standards that could be more sweeping than a controversial proposal in a House bill passed last year.

An aide to Ms. Colllins said that specific language for a specific amendment has not yet been drafted. But at two hearings this week, Ms. Collins indicated that she may favor imposing fiduciary requirements on broker dealers for both retail and institutional investors.

During a contentious April 27 hearing, Ms. Collins grilled current and former officials of The Goldman Sachs Group Inc. on whether they put company profits above the welfare of their clients. “I raised what I think is an essential issue,” she said later.

Indeed, support for expansion of the fiduciary standard has clearly picked up — just as the full Senate grapples with the specifics of the financial reform bill that went to the floor today.

The bill that emerged from the Senate Banking Committee in March calls for a Securities and Exchange Commission study on whether broker-dealers who provide investment advice should meet the same fiduciary obligation as investment advisers. An amendment written by Sen. Robert Menendez, D-New Jersey, and Sen. Daniel Akaka, D-Hawaii, would replace the Senate provision with one from the House bill. That provision instructs the SEC move ahead with writing a universal fiduciary standard for investment advisers and broker giving advice.

The House proposal would apply only to retail investors, however. In her questioning of Goldman executives, Ms. Collins indicated that she favors broader fiduciary coverage.

“That tends to make me think that there is some conversation going on behind the scenes to expand the House fiduciary duty beyond just retail investors,” said Texas Securities Commissioner Denise Voigt Crawford, who also is president of the North American Securities Administrators Association.

The insurance and securities industries oppose applying a universal fiduciary standard. They argue such a requirement would hamper brokers' ability to serve their clients and might preclude them from conducting customary business, including selling proprietary products.

“I'm not sure whether highlighting this issue is going to be sufficient to rally the votes needed for an amendment that would establish a fiduciary standard immediately,” said Dan Barry, director of government relations for the Financial Planning Association.

Nevertheless, Ms. Collins is pressing her case.

The day after the Goldman hearing, she engaged in an exchange with SEC Chairman Mary Schapiro about the scope of the fiduciary requirement.

At an April 28 hearing of a Senate Appropriations subcommittee, which has jurisdiction over the SEC budget, Ms. Shapiro said: “The duty that exists on the investment advisory side does not exist, clearly, on the on the broker-dealer side, and we need the law to make this a uniform fiduciary duty.”

“And in writing this new rule, like we did, should we distinguish between individual retail investors for whom having that obligation is perhaps even more important — because they're less sophisticated, arguably than most institutional investors — or should it apply across the board?” Ms. Collins asked.

“I think we could step this up over time to be broader,” the SEC boss said. “But I would start very clearly with retail.”

[Jessica Toonkel Marquez contributed to this story]

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Jun 27

Webcast

Emerging Market Debt: 5 Forces at Work

When it comes to emerging market debt, there are a series of forces that help you drive better results for your clients. In today's continually changing market environment, it is critical to know the forces at play to help keep your investment... Learn more

Accepted for 1 CE Credit from the CFP Board. Approved by IMCA for 1 CIMA®/CIMC®/CPWA® CE credit. Approved for 1 CFA Credit.

Featured video

Events

Why the bionic adviser is the way of the future

The bionic adviser is the way of the future. We spoke with Simon Roy of Jemstep to get his insights on how technology will continue to impact the industry.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Brian Block's $4 million bonus was tied to a key metric at ARCP

Prosecution rests case in fraud trial against CFO of American Realty Capital Properties.

Edward Jones is winning the Google search war

Brokerage firm's digital marketing investment helps land it at the top of local and overall search engine results, report finds.

Voya's win in 401(k) fee suit involving Financial Engines bodes well for other record keepers

Fidelity, Aon Hewitt and Xerox HR Solutions are currently defending against similar fiduciary-breach claims.

Collective investment trusts getting more attention from 401(k) advisers

The funds are catching on due largely to lower costs and more product availability, but come with some inherent drawbacks.

Vanguard rides robo-advice wave to $65B in assets

Personal Advisor Services, four times the size of its closest competitor, combines digital and human touch.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print