In its newly released financial report for fiscal 2014, the SEC has stated that they will be evaluating recommendations from a staff report to consider a uniform fiduciary standard for investment advisors and broker-dealers as well as finding ways to harmonize rules for advisors and brokers in fiscal 2015.
The rule would establish a uniform fiduciary duty for retail investment advice. Investment advisers already meet the proposed fiduciary standard. However, brokers are held to a suitability standard, which allows them to sell products to clients if investment needs are met. The SEC will likely make a determination this year on this rule or if they will be taking another approach.
“In FY 2015, the SEC will strive to advance the final rules required to build a more stable and transparent financial system by … evaluating recommendations from a staff report to consider a uniform fiduciary standard of conduct for investment advisers and broker-dealers when providing personalized investment advice to retail investors about securities.” The report says the agency also will consider “ways to better harmonize the regulatory requirements of investment advisers and broker-dealers when they are providing the same or substantially similar services to retail investors.”
SEC Chairwoman Mary Jo White said on November 10 at SIFMA’s annual meeting that that deciding whether to use the authority given to the SEC by the Dodd-Frank Act to put brokers under a fiduciary mandate is “an issue that I’ve been focused on since I arrived, and certainly in this last fiscal year.” White further noted that she would provide more clarity as to her position on a uniform fiduciary rule in the short term, even though the SEC has not yet made a formal decision. The inquiry on the fiduciary rule will be more complex than simply creating a uniform rule, as there are “a lot of different things that can mean,” White said. “Care needs to be taken to ensure we’re not harming investors by driving away service providers in the brokerage space.”
There is much to debate as to whether a fiduciary standard should apply to broker-dealers. But looking ahead, it appears changes to a broker’s standard of care will be highlighted.
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