Disclosure not the solution for a fiduciary standard, industry reps agree

Executives representing RIAs and brokers said they expect to see the SEC come up with a proposal this year, but not adoption

Feb 2, 2018 @ 2:21 pm

By Jeff Benjamin

Representatives from both the brokerage industry and the registered investment advisory side of the advice business expect the Securities and Exchange Commission to produce some kind of proposal this year for a fiduciary standard for brokers.

And both agreed that simply requiring brokers to disclose potential conflicts of interest will not satisfy the need for an effective fiduciary standard.

The topic was the focus of a panel discussion at TD Ameritrade Institutional's LINC 2018 conference in Orlando on Friday.

"Our position is, you cannot disclose away your fiduciary duty," said Karen Barr, CEO of the Investment Adviser Association. "Disclosure does not absolve you from acting in the best interest of your client. If the SEC cannot come up with a standard for broker-dealers that is robust enough that brokers giving advice should act in best interest of clients, then brokerage reps should not hold themselves out as financial advisers."

"We think the path forward is to focus on a best-interest standard for broker-dealers," said Kevin Carroll, managing director and associate general counsel at the Securities Industry and Financial Markets Association, whch represents brokers. However, he said he opposed the idea of having titling requirements. "You could think of an infinite number of titles a broker could fall back on," he said.

"Our current position is we would like to see the SEC address this just under the 1934 Act for broker-dealers, and leave Investment Advisers Act alone," said Ms. Barr.

"We believe an SEC best-interest standard could form the basis for relief from the DOL rule," said Mr. Carroll. "We are hoping the DOL rule will be stricken in its entirety."

Although they expect the SEC to come forward with a proposal, netither thinks that any real action beyond triggering "hundreds or thousands" of comment letters will come of it.

Knut Rostad, president of the Institute for the Fiduciary Standard, attended the session and said he is worried the direction the SEC is taking.

"I think the SEC is going to act sooner rather than later, but I'm fearful that the SEC has focused so much on disclosure," he added. "That's worrisome, in terms of what we might see. A disclosure-based regime is just a very small piece."

Tom Nally, TD Ameritrade Institutional president, who did not sit in on the session, commented afterward that the issue is less about writing new regulations than it is about enforcement of existing regulations.

"It's not that the regulations are broken, it's the enforcement of the rules that's the problem," he said. "Our enforcement agencies have allowed people to present themselves as advisers but not required them to be registered under rules for advisers. That has caused these endless debates."

0
Comments

What do you think?

View comments

Recommended for you

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Featured video

Events

Transamerica's Boan: Crafting better retirement income conversations

Retirement income is a challenge for investors. How can advisers have better conversations about retirement income? Transamerica's Joseph Boan offers insights and tips for advisers.

Latest news & opinion

As Ameriprise case shows, firms on hook when brokers go bad ​

The SEC will collect $4.5 million from the brokerage firm for failing to supervise brokers who were ripping off clients.

10 highest paid professions in America today

These are the top-paying jobs in the U.S., according to Glassdoor.

Ameriprise to pay $4.5 million to settle SEC charges that five reps stole more than $1 million from clients

Agency censures firm for not protecting clients from thieving brokers.

SEC slaps Lockwood with $200,000 fine over unseen trading costs to clients

Clients were forced to pay fees in addition to the usual wrap charges, the regulator maintains.

Gotcha! 10 lessons from brokers gone bad

These cases show why regulators nabbed reps and firms, and how to avoid their fate.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print