SEC Recommends Uniform Standard of Care

There are so many caveats in this report that it’s almost anti-climactic after six months of expectation and debate.

Basically the SEC has looked at the issue of whether stockbrokers should be able to operate under mere Suitability requirements while only financial advisors have a true Fiduciary standard of care.  They’ve just reported their findings along with a recommendation to Congress.

Based on the study, the commission seems to agree that everyone should abide by a uniform code if they’re going to be dealing with the public; how such a standard should be interpreted and implemented requires more study, however.

From Financial Planning Magazine:

As part of the Dodd-Frank law, the SEC was told it could hold brokers to a higher standard, forcing them to put their client interests above their own. Advisors are already held to that standard.

The much-anticipated study found that many investors are confused about the roles of brokers and advisors and are unsure of their protections when they receive advice. The study recommended the SEC create a uniform standard to simplify the client experience.

“Retail customers should not have to parse through legal distinctions to determine whether the advice they receive was provided in accordance with their expectations,” the study said.

The powerful Securities Industry and Financial Markets Association (SIFMA) seemed pleased with the uniform code but many factions on The Street will not be.  Advisor groups will complain that by including brokers and people who sell product for a living, the Fiduciary Standard itself will become watered down and lose it’s meaning.  Brokerages will say that it will be impossible to conduct their model under the code and that this represents the beginning of the end of transactional commission business.

I’ll be covering this subject, as I have been, extensively at my Wall Street Journal FA blog perch.

SEC Recommends Uniform Fiduciary Standard (FP)

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  1. Blue Coaster33 commented on Apr 30

    The Silent Shard

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