This is my favorite topic. If you read my last post, you understand why I believe that acting in the spirit of "fiduciary" sets every advisory firm up for success, compliance and otherwise. One of the few remaining items in Dodd Frank is the question whether there should be one uniform fiduciary standard for the investment advisor and the broker-dealer profession. And if so, what would it look like. The SEC has yet to address it in its rulemaking.
It did commission a study to explore it, but has yet to act on its findings. According to Mary Jo White, it’s a 2015 priority. The study is well written and is a great anthology of the views of advisers and broker dealers and the compliance regimes governing them. At the heart of discussion is the difference in standard that applies to financial advisors (client’s best interests) vs. broker dealers (suitability). The issue is simple: investors are confused about the distinction. Here is my concern regarding a "unified" solution, many permutations of which are circulating: trying to fit two radically different business models under one label will not work. If investor confusion is the concern, I am certain that the fine print of the one "uniform" standard will create even greater obscurity. If you ask me it’s really simple: the answer is disclosure. I am with SEC Commissioner Piwowar on that.
Disclosure is one of the pillars of the fiduciary standard anyhow. It also seems that FINRA is already heading in the right direction with or without formal SEC rulemaking. No doubt, 2015 will be an interesting year. It might be a year of “reform” that either misses its purpose or clarifies existing frameworks and does the trick. Stay tuned for updates on what comes down.
Eckerle Law offers legal advice in a variety of transactional and regulatory matters and serves companies’ plenary business law needs. Its founder, Bettina Eckerle, practiced law at Debevoise & Plimpton and Wachtell, Lipton, Rosen & Katz, before serving as the General Counsel of two companies en route to IPO. Please visit the Eckerle Law website for more details. She is also the author of "The Ultimate Guide to the Advisers’ Act, A Practitioner’s Handbook" that is now available on Amazon.com.