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Fearful that the SEC has been overworked, lobbied and bullied into a SIFMA stupor, fiduciary crowd launches 16-page missile

Among other things, the letter calls SIFMA's idea of a uniform fiduciary standard a 'broker sales standard'

Author Hilary Johnson April 13, 2012 at 3:44 AM
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Dan Moisand: They have the opportunity to stop it, or screw it up worse than they already have.

Stephen Winks

Stephen Winks

April 13, 2012 — 5:15 PM

Given brokers are not accountable for their recommendations and have no ongoing fiduciary responsibility to act in the client’s best interest, the public policy objective of Dodd-Frank to restore the trust and confidence of the investing public is clear to all, including Congress and the SEC.

Why is it that the brokerage industry has to grant permission to the SEC to execute its Congressionally mandated duties ? Are brokers going to act in the best interest of the consumer or are they not.

The missing point in the discussion is that the industry’s defense from incurring fiduciary liability by simply maintaining brokers do not provide advice is terribly expensive running 15% to 20% of gross revenues which rivals in size the industry’s margins. If the industry would simply redeploy the resources it presently expends on assuring its brokers do not render advice, to actually supporting fiduciary standing so advice is safe scalable, easy to execute and manage as a business, the trust and confidence of the investing public would immediately be restored.

The economics of advice gives the industry three times the earnings multiple to commission sales, streamlines cost structure, facilitates an unprecidented level of investment and administrative counsel at a lower cost than a packaged retail product all of which is beneficial especially the broker who wants to act in the client’s best interest. The only question that remains is why wouldn’t the industry support the best interests of the investing public especially when it is a Congressional imperative.

Doesn’t it seem odd, that the best interest of the investing public is even in question here ? This should not have anything to do with the best interest of the brokerage industry. It is all about the trust and confidence of the investing public, the wisdom of public policy, not the best interest of the brokerage industry.


Steve Thomas

Steve Thomas

April 13, 2012 — 6:12 PM

In my 8 years as a state regulator and now as a compliance consultant I have never received a NO answer to this question, “Don’t you always act in you client’s best interest?” The BD side of the business wants their cake and to eat it to but stating they always act in the client’s best interest – and letting their clients think that is the case – but not having their feet held to the fire when it comes to regulation that requires a true fiduciary standard. It’s time to fish or cut bait and the knife is in the SEC’s hand…ST

Stephen Winks

Stephen Winks

April 13, 2012 — 7:37 PM

Steve Thomas,

Your insight as a regulator is very instructive. From the perspective of a regulator, why is this Congressional mandate holding brokers to the fiduciary standard so difficult for the SEC? It is an easy call.

It is only complex if the SEC is trying to thread the needle in deference to the brokerage industry, not the consumer they are charged to protect. It is incredible that the brokerage industry would actually want to rewrite 800 years of trust law, very unfavorably impacting wide ranging institutions which have been in place since the beginning of time because it can not adapt to modernity which leverages the broker through advanced processes, technology and supporting resources.

What puzzles me is why is this even a close call for the SEC.


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