The Controversy Over a Fiduciary Standard for Advisers & Brokers Heats Up

The Dodd-Frank Act gives the SEC the authority to require a uniform standard on advisors and commission-dependent brokers and required the agency to conduct a six month study examining the issues surrounding such a standard. In January, the SEC released their study showing while broker-dealers and investment advisers are regulated extensively, the regulatory regimes differ with each being subject to different standards under federal law when providing investment advice about securities. The study found that retail investors generally are not aware of these differences or their legal implications. Ultimately, the SEC Staff recommended establishing a uniform fiduciary standard for investment advisers and broker-dealers when providing investment advice about securities to retail customers that is consistent with the standard that currently applies to investment advisers. Since the study was released, there has been much consternation in the investment advisory industry about whether a fiduciary standard is necessary and appropriate and who exactly should enforce such a standard if it is enacted. Currently, the SEC is the overseer of the industry but there are clear lapses with the Agency only inspecting the books at advisory firms roughly every 11 years on average. Yesterday the House Committee on Financial Services held a hearing to discuss draft legislation that would authorize self-regulatory groups like the Financial Industry Regulatory Authority (FINRA) to examine investment advisers. While SRO's like FINRA may be well-equipped to handle the task, many wonder if it is unwise to allow the industry to police itself. As this topic is just beginning to heat up and a long legislative fight may lie ahead, I thought it might be a good time to scour the web using Storify to find news and analysis on this important topic: View "The Controversy Over a Fiduciary Standard for Advisers & Brokers" on Storify

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