Fiduciary comments streaming into SEC

In the two days since the Securities and Exchange Commission formally began seeking comment on establishing a fiduciary duty for retail investment advice, more than 70 individuals have submitted statements ranging from one line to several paragraphs. The SEC will consider the opinions it gathers over the next few weeks as it prepares a study examining the different standards of care that apply to investment advisers and broker-dealers. The review is one of hundreds of studies and rulemakings emanating from a 2,300-page financial-regulatory-reform bill signed into law by President Barack Obama on July 21. The SEC must submit its fiduciary report to Congress by Jan. 21. It then has the authority to promulgate a rule establishing a universal fiduciary standard. Fiduciary proponents and opponents will put as much energy into trying to persuade the SEC to adopt their point of view as they did to convince lawmakers to include a fiduciary provision in the reform bill. So far, the responses have come from individual financial professionals and academics. Those who wish to weigh in can do so through the SEC website at sec.gov/rules/other.shtml. The release number is 34-62577, and the release date is July 27. Comments are due within 30 days of publication of the request in the Federal Register, which should occur this week. Knut Rostad, chairman of the Committee for the Fiduciary Standard, is concerned that 30 days is too narrow a window to achieve SEC Chairman Mary Schapiro's goal of generating maximum investor feedback. “From the view of the guy in the street, it's a short time,” said Mr. Rostad, who is also regulatory and compliance officer at Rembert Pendleton Jackson, an investment advisory firm. He also noted that August is the most popular vacation month. The Certified Financial Planner Board of Standards Inc. shares Mr. Rostad's qualms. “The one area we are a little concerned about, though, is the short time span for allowing initial public comment,” Marilyn Mohrman-Gillis, CFP managing director of public policy and communications, wrote in an e-mail statement. “That being said, we will work diligently to get our comments in on time and ensure that we take advantage of other opportunities to make the SEC aware of our position.” Groups such as the CFP Board and the fiduciary committee are likely to wait until later in the comment period to submit their positions. “Insiders like to put their comments in on the last day,” Mr. Rostad said. “I guess it's because folks don't want to tilt their hand to other folks before the comment period is up.” For now, individual financial professionals are making statements that will be echoed by groups on both sides of the debate. “Claiming to be a fiduciary when in practice you are a broker, representing your broker-dealer employer, is misrepresentation and a major conflict of interest,” wrote John E. Cress, a certified financial planner. “This practice needs to stop.” But other respondents question how a fiduciary standard, which requires that an adviser act in the best interests of a client and disclose material conflicts of interest, would apply to a broker-dealer, who would have to ensure that he or she offered only those products suitable to a client's investment needs and timeline. “I would like someone to tell me what ‘in the best interest of the client' means,” wrote Alistair Kelly. “Does it mean lowest fees? Does it mean the best trailing returns? Does it mean the lowest risk? Do we have to use only index funds?” Others looked at the issue philosophically, noting that investors have to take responsibility for keeping track of their own assets, regardless of the standard of care mandated by the government. They also noted that a standard doesn't guarantee good service. “The skill and capability of the adviser is not addressed by a fiduciary or suitability standard,” wrote Charles Rigsby, a certified financial planner and broker.