Contrary to what some of the comments received by the DOL/EBSA suggest, fiduciary duties are neither too “ill-defined” nor “vague” to be applied to investment advisory activities. Such duties have been applied to other professionals for centuries. Additionally, there is a significant body of case law applying fiduciary duties of due care, loyalty, and good faith upon the activities of investment advisers (both at the federal and state level).
Disclosures and client consent are insufficient – by themselves – to satisfy the fiduciary standard. Investors must be able to rely on and have confidence in the expertise of their advisor. This can only be accomplished by applying a standard that prohibits all conflicts of interest.
Certain comments made by Kenneth E. Bentsen, Jr. of SIFMA before the U.S. Department of Labor hearing on the proposed definition of fiduciary regulation were either misleading and/or not relevant to the issues under consideration. The DOL should carefully scrutinize the (flawed) arguments of those organizations opposed to a bona fide fiduciary standard of conduct.
Rulemaking – The Commission may commence a rule-making, as necessary or appropriate in the public interest and for the protection of retail customers, to address the legal or regulatory standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice about securities to retail customers.