A financial planners' group warned congressional leaders last week against enacting proposed standards for advisers that are being endorsed by the brokerage industry.
The Committee for the Fiduciary Standard, a group of 600 investment advisory firms, sent a letter to House Financial Services Committee Chairman Barney Frank, D-Mass., and others, voicing concern about proposals to adopt a new fiduciary code of conduct for brokers and advisers.
“The committee is concerned that misunderstandings of the authentic fiduciary standard could inadvertently be reflected in legislation and weaken the standard at the exact time that investors are looking to Congress and regulators to strengthen oversight of the financial system and Wall Street,” according to the letter.
Positions taken by the Securities Industry and Financial Markets Association, the letter added, “demonstrate an apparent lack of understanding of, and/or commitment to, such fundamental fiduciary duties as full disclosure, the obligation to manage conflicts in the investor's interest, and consideration of expenses in investment decisions.”
Kevin Carroll, managing director and associate general counsel at SIFMA, rebutted the claims made in the committee's letter.
“This once again misrepresents SIFMA's advocacy for a new federal fiduciary standard that would improve investor protection,” he said.
“The so-called authentic fiduciary standard that this committee is pushing does not exist because the status quo consists of 50 disparate state court interpretations. Investors deserve better; a federal fiduciary standard would deliver that,” Mr. Carroll said.
Investment adviser groups are concerned that if brokers are brought under the same regulations as advisers, the traditional fiduciary standards that now apply to advisers would be weakened.
According to the committee's analysis, standards endorsed by SIFMA don't include disclosure and legal obligations for prudence that fiduciary standards would entail.
E-mail Sara Hansard at [email protected].
