Historical timeline of fiduciary duty for financial advice

MAR 16, 2016
  • 1934

Securities and Exchange Act

SEC commission in 1934
The law codifies governance of the securities exchanges and broker-dealers and leads to the creation of the Securities and Exchange Commission.
Read more
  • 1940

Investment Advisers Act

The measure, whose genesis was a 1935 SEC report about investment advice, codifies the regulation of investment advisers. It is mostly a registration, disclosure and fraud-prevention law that notes a fiduciary obligation to clients. But it does not contain specific language defining a fiduciary standard of care.
Read more
  • 1963

SEC vs. Capital Gains Research Bureau

The Supreme Court said the congressional intent of the 1940 Act was “to eliminate, or at least expose, all conflicts of interest which might incline an investment adviser — consciously or unconsciously — to render advice which was not disinterested.” The court affirmed an adviser-client fiduciary relationship that provides fewer restrictions to the SEC bringing actions for fraud than are found in a common-law, arms' length transaction standard.
Read more
  • 1995

Committee on Compensation Practices

A commission led by Daniel Tulley, chairman and CEO of Merrill Lynch & Co. Inc., delivered a report on April 10 about conflicts of interest caused by compensation practices in the retail brokerage industry. The study, conducted at the request of SEC Chairman Arthur Levitt, suggests fee-based accounts as a way to minimize conflicts.
Read more
  • 1999

Incidental advice

The SEC proposes a rule that would exempt brokers from the 1940 Act if they provide advice that is “solely incidental” to their brokerage services in fee-based accounts.
Read more
  • 2005

The 'Merrill Lynch rule'

The SEC re-proposes the 1999 rule on fee-based brokerage accounts, which is now known as the “Merrill Lynch rule.” The rule states that “exercising investment discretion” or providing financial planning services would make a broker subject to the 1940 Act. The Financial Planning Association, seeing a threat to its fee-only investment advisers, sues the SEC.
Read more
  • 2007

FPA wins

In a divided opinion, the D.C. Circuit Court of Appeals vacates the “Merrill Lynch rule.” Brokers must adhere to fiduciary duty when working with fee-based brokerage accounts. Critics say the SEC is lax in enforcing the “solely incidental” requirement.
Read more
  • 2009

Treasury report suggests harmonized regulation

The Treasury Department in the new Obama administration releases a report that outlines ways to “increase fairness for investors.” The report proposes that the SEC “establish a fiduciary duty for broker-dealers offering investment advice, and harmonize the regulation of investment advisers and broker-dealers.”
Read more
  • 2010

Dodd-Frank law

President Barack Obama signs the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In July, President Barack Obama signs the Dodd-Frank financial reform law, which gives the SEC the authority to promulgate a uniform fiduciary duty standard for retail investment advice that is no less stringent than the 1940 Act. The measure provides safe harbor for several brokerage activities, including charging commissions, selling proprietary products and principal trading. It also limits the continuing duty of care.
Read more
  • 2010

DOL releases fiduciary rule

In September, the Labor Department releases a rule designed to limit conflicts of interest for financial advisers working with clients in retirement accounts.
Read more
  • 2011

SEC report favors uniform fiduciary

In January, the SEC staff issues a report recommending the commission propose a uniform fiduciary duty rule.
Read more
  • 2011

Industry fights back

In September, the DOL withdraws its conflicts of interest rule amid fierce industry criticism. The agency projects a re-proposal in early 2012 – and misses by three years
Read more
  • 2013

SEC seeks cost-benefit feedback

In March, the SEC releases a request for comment on the costs and benefits of a uniform fiduciary duty rule and harmonization of adviser and broker regulations. Parameters of a fiduciary rule outlined in the request as a way to frame questions closely resembles a July 2011 proposal from the Securities Industry and Financial Markets Association. The SEC has not published the results of this comment request.
Read more
  • 2013

Perez confirmed

Vice President Joe Biden swears in Thomas Perez as the 26th Labor secretary.
In July, Thomas Perez is confirmed by the Senate as Mr. Obama's second secretary of labor, succeeding Hilda Solis. At his confirmation hearing, Mr. Perez promises to listen to stakeholders before deciding how to proceed with the fiduciary rule.
Read more
  • 2015

Obama demands progress

In February, President Obama directs the DOL to re-propose its fiduciary duty rule. Mr. Obama says protecting workers and retirees from conflicted advice would shield more than $17 billion in savings lost annually to inappropriate high fees.
Read more
  • 2015

White announces support

Mary Jo White
In March, SEC Chairwoman Mary Jo White announces her support for a fiduciary duty rule, but cautions that she must find support from two of the other four bipartisan commissioners to propose a rule.
Read more
  • 2015

DOL re-proposes rule

In April, the Labor Department proposed a new rule requiring fiduciary advice for retirement accounts.
Read more
  • 2015

Comment period, hearings

Following an initial comment period, the DOL holds four days of hearings on the fiduciary rule in August. A second comment period closes in late September. The agency receives more than 3,000 letters about the proposed rule.
Read more
  • 2015

Political sides drawn

Sen. Elizabeth Warren
During the fall, politics surrounding the rule proposal heat up. The financial industry, Republican lawmakers and SEC commissioner Daniel Gallagher attack the rule as “unworkable.” Proponents, led by Sen. Elizabeth Warren, D-Mass., and consumer groups, rally Democrats to stand with the administration, as legislation is introduced that would attempt to block the rule.
Read more
  • 2016

Rule heads to OMB

On Jan. 29, the DOL sends the rule to the Office of Management and Budget for review. The final rule is expected to be released in March or April. Additional attempts to scuttle it — through legislation or lawsuits — are anticipated.
Read more

Latest News

Retirement planning gets more defensive
Retirement planning gets more defensive

As volatility and sequence risk weigh on investors nearing retirement, Allianz Life is expanding tools designed to help financial professionals balance growth potential with greater downside control

From saving to spending: Using annuity solutions to address retirement income complexity for clients
From saving to spending: Using annuity solutions to address retirement income complexity for clients

What it really takes to serve ultra high net worth clients
What it really takes to serve ultra high net worth clients

Most firms think they are ready for the ultra high net worth market. Most are not.

Stifel settles another complaint involving former star Miami broker
Stifel settles another complaint involving former star Miami broker

Stifel has paid or is on the hook for close to a staggering $200 million in damages and settlements to former clients of Chuck Roberts.

Advisor moves: LPL firm Genesis Wealth adds $725M veteran from JPMorgan
Advisor moves: LPL firm Genesis Wealth adds $725M veteran from JPMorgan

UBS also expanded in the Southeast with six advisors overseeing more than $2 billion, while Osaic lured a $300 million family-led practice from Wells Fargo's FiNet.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.