FPC disappointed that Senate Banking Committee chairman's revised legislation failed to extend fiduciary standard to brokers
The Financial Planning Coalition today expressed disappointment that Sen. Christopher Dodd's financial reform bill does not extend the fiduciary standard of care to brokers who give personalized investment advice.
“There is well-documented consumer confusion around the different legal obligations that broker-dealers and investment advisers owe to their clients for essentially the same services,” said coalition spokesman William Baldwin. “The extension of the fiduciary standard of care — which mandates that a financial adviser must act in the best interests of his or her clients — to all brokers who give personalized investment advice would clear up this confusion and strengthen protections for all Main Street investors.”
The revised bill introduced in committee by the Connecticut Democrat does not strip the fiduciary exemption from brokers and dealers. Instead, the legislation mandates that the Securities and Exchange Commission and the Office of the Comptroller of the Currency conduct a study on various effects of extending the fiduciary standard to brokers offering financial advice.
Certainly, any real legislative campaign to expand the standard appears to be years off. The Dodd bill, for instance, gives the SEC a year to study the issue. The commission then has another year to come back to Congress with recommendations — if any.
The Financial Planning Coalition FPC, comprising the Financial Planning Association, the Certified Financial Planner Board of Standards Inc. and the National Association for Personal Financial Advisors, said that any study on this issue needs to be conducted swiftly and with clear authority for the SEC to act immediately on its completion.
The coalition had lobbied for a plan that would create a federal oversight board for the financial planning industry.
So far, that idea has failed to gain much traction on Capitol Hill. It was not included in Mr. Dodd's revised draft.
Meanwhile, state securities regulators also expressed disappointment that the financial reform bill released by Sen. Dodd removed the fiduciary requirement for financial advisers.
"The latest bill draft has removed the single most important protection for individual investors – requiring that stockbrokers providing investment advice act in their clients’ best interest," said Denise Voigt Crawford, Texas Securities Commissioner and president of the North American Securities Administrators Association Inc., in a letter to Mr. Dodd and Senator Richard Shelby, ranking member of the Banking committee.
