Washington, D.C. – The Institute for a Fiduciary Standard, in a letter to the Securities and Exchange Commission, warned that a proposal by SIFMA fails to uphold essential fiduciary principles. Fiduciary duties of loyalty and due care are replaced with broker-dealer guidance on suitable “broker sales” recommendations, support for conflicted advice, inadequate disclosure, and unrestrained fees. The letter notes, for example, that while the SEC requires advisers’ disclosure of conflicts be effective for investors, SIFMA strenuously argues for disclosure that is efficient for broker-dealers.
For these and other reasons, the Institute concludes the SIFMA proposal does not meet the requirements of the Dodd-Frank Act. Dodd-Frank authorizes the SEC to establish a uniform fiduciary standard which “shall be no less stringent than the standard applicable to investment advisers,” the Institute wrote in the comment letter.
Boston University professor of law and Michaels Faculty Research Scholar, Tamar Frankel, a national authority on fiduciary law, points out, “A uniform standard must be uniform in all aspects. SIMFA’s selective uniformity does not meet the Dodd-Frank requirement.”
“SIFMA’s proposed departure from the Advisers Act is dramatic,” added Knut A. Rostad, president of the Institute for the Fiduciary Standard. “As an example, SIFMA advocates that all products available to investors today through the suitability standard should automatically be available through a uniform fiduciary standard, essentially negating the fiduciary ‘best interest standard,’ added Rostad. “Yet, FINFA CEO, Richard Ketchum has recently spoken out and urged BDs to NOT develop products that only meet the minimally acceptable suitability standard.”
“Simply put, SIFMA is proposing a broker sales standard, not a fiduciary standard,” said Knut Rostad, president of the Institute for a Fiduciary Standard. “It falls way, way short of the fiduciary obligation established under the Advisers Act. As such, SIFMA’s is trying to overlay Wall Street’s product sales model on to the Advisers Act fiduciary advice model.”
For more details, see the full letter to the SEC.
Press Release (PDF)
Edit: For more information about our comments and the comments of other financial industry associations on this issue, have a look at the RIABiz article: Fearful that the SEC has been overworked, lobbied and bullied into a SIFMA stupor, fiduciary crowd launches 16-page missile.