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

Sponsored financial news

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

What's the first thing advisers should do when they get home from a conference?

After attending a financial services conference, advisers can be overwhelmed by options, choices and tools. What's the first thing they should do when they get back to their office?

Latest news & opinion

Is Fidelity competing with retirement plan advisers?

As the Boston-based mutual fund giant expands the products and services it brings to the retirement market, some financial advisers say the firm is encroaching on their turf.

Gun violence hits investment strategies, sparks political debates with advisers

Screening out weapons companies has limited downside.

Whistleblower said to collect $30 million in JPMorgan case

The bank did not properly disclose that it was steering asset-management customers into investments that would be profitable for JPMorgan Chase.

Social Security underpaid 82% of dually entitled widows and widowers

Agency failed to tell survivors that they could switch to a higher retirement benefit later.

If Finra eases firm oversight of outside business activities, broker-dealers could lose revenue

Brokerage firms would no longer be able to charge reps for supervising nonaffiliated RIAs.

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