A proposal put forward by the Obama administration and Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, would weaken the Investment Advisers Act of 1940, according to the head of a group that represents federally registered advisers.
Brokers who provide investment advice should abide by the same fiduciary standards as investment advisers, said David Tittsworth, executive director of the Investment Adviser Association, which re-presents advisory firms registered with the Securities and Exchange Commission.
He testified last Tuesday at a Financial Services Committee hearing on reform of broker-dealer and investment adviser regulations.
“Unfortunately, the Investor Protection Act, as drafted, would not achieve this laudable result,” Mr. Tittsworth said. “Instead, it would open the door for watering down or weakening the current fiduciary standard by redefining fiduciary duty under the Advisers Act.”
Mr. Tittsworth also complained that the bill, as drafted, could lead to non-retail advisory customers' losing fiduciary protections from their advisers. This would include mutual funds and pension funds.
“It would be a mistake to alter or narrow the existing fiduciary standard under the Advisers Act,” he said.
The brokerage industry is calling for adopting a new federally defined fiduciary standard, and brokers are seeking to ensure that their industry is allowed to continue providing non-advisory services such as trading and investment banking without being held to the strict -conflict-of-interest rules that advisers must abide by under fiduciary standards.
“Harmonized standards should apply only to personalized investment advice” given to retail customers, said Bruce Maisel, vice president and managing counsel of Thrivent Financial for Lutherans. Mr. Maisel testified on behalf of the American Council of Life Insurers.
“We strongly oppose any requirement of acting without regard to the financial interest of the broker or investment adviser,” he said. That could chill the ability of brokers or advisers to provide advice, Mr. Maisel said.
E-mail Sara Hansard at [email protected].
