The Securities and Exchange Commission would be expected to define a fiduciary standard that would be applied to brokers and investment advisers, according to draft legislation released this afternoon by House Capital Markets Subcommittee Chairman Paul Kanjorski, (D-Penn.).
The Securities and Exchange Commission would be expected to define a fiduciary standard that would be applied to brokers and investment advisers, according to draft legislation released this afternoon by House Capital Markets Subcommittee Chairman Paul Kanjorski, (D-Penn.).
The 114-page draft of the “Investor Protection Act” put forward by Mr. Kanjorski would require the SEC to issue rules requiring all financial service professionals who provide advice to act “in the best interest of the customer without regard to the financial or other interest of the broker, dealer or investment adviser providing the advice.”
The Securities Industry and Financial Markets Association, which represents Wall Street, supports the idea of having the SEC develop a more precise definition of what it means to be a fiduciary. Indeed, fiduciary standards are currently ill defined, said Kevin Carroll, SIFMA's managing director and associate general counsel.
However, the Investment Adviser Association does not want the SEC to issue new standards.
“We think trying to define fiduciary duty would be a mistake,” IAA executive director David Tittsworth said. “It's no more appropriate to insist on a precise definition of fiduciary duty than it would be to insist on a precise definition of the duty not to commit fraud.”
The bill also would double SEC funding over five years and provide new enforcement powers and regulatory authority, and it would ban the industry practice of requiring mandatory arbitration provisions in investor contracts.
A hearing is scheduled to be held Oct. 6 in the House Financial Services Committee on adviser and other issues.
Mr. Kanjorski also released a draft bill that would require hedge fund and other private fund advisers to register with the SEC, and another draft that would set up a Federal Insurance Office in the Treasury Department to monitor the insurance industry and recommend insurers that should be subject to systemic risk regulation by the Federal Reserve Board. The office would have the authority whether state insurance regulations should be pre-empted by international treaties.
