- Best Practices
- Fiduciary September
- Frankel Prize
- Campaign for Investors
Testimony of Tamar Frankel, LL.M. S.J.D. Professor of Law EmeritaBoston University School of LawBefore the N.J. Bureau of Securities Re: Fiduciary Duty/Pre-Proposal on November 19, 2018
Testimony to the New Jersey Bureau of Securities by Knut A. Rostad on November 19, 2018 regarding the Pre-proposal “Legal and factual basis” to apply a fiduciary Standard to financial services reps.
The Board has a unique opportunity to set a true fiduciary standard, and seize the moment to benefit generations to come. In the attached letter to the SEC from the Institute, we provide further steps and protocols to manage and neutralize conflicts impact. We urge the Board to apply them.
Adviser and Broker Dealer Standard of Conduct: For generations, the Advisers Act of 1940 has served well as a “contract” between advisers and their clients. The Commission’s rulemaking here effectively puts this “contract” under review and renewal.
The proposed standards move financial planners towards professionalism on a number of fronts. Two stand out. One, in a sharp departure from the current standards, all CFPs who render financial advice are held to fiduciary conduct. Two, in the proposed standards conflicts begin to be addressed.
Fiduciary September 2014 Special Webinar with five panelists: John Taft (JT), RBC Wealth Management, Michael Falk, Focus Consulting Group
, Jack Waymire, Paladin Registry, David Armstrong, WealthManagement.com, and Knut A Rostad (KR), Institute for the Fiduciary Standard
On July 14, 2011 SIFMA submitted comments to the SEC on a proposed framework for establishing a uniform fiduciary standard of conduct for broker-dealers. SIFMA’s proposal departs from the fiduciary standard as set forth under the Advisers Act of 1940 and, if adopted, would be particularly harmful to retail investors.
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.
Many people have asked about the origins of the “Butcher versus Dietitian” white board video recently popularized by Hightower Advisors and Tony Robbins. Its an excellent video, no doubt. Full disclosure, the first rendition of this story line to explain the differences between a broker and investment adviser in recent times (that I am aware of) was actually ten years ago when Harold Evensky and I collaborated on the idea in a different format and medium. Click the link above to see the PSA and news release. Knut
Institute Research Associate – Darren Fogarty
Darren Fogarty is a Master’s student at the Nicholas School of the Environment at Duke University, where he studies Environmental Economics. He sees this as complementary to the work he does for the Institute, where his passion for sustainability takes the form of promoting and preserving the principles which uphold the capital markets.
Darren also works as a copywriter for an employee benefits advisory firm in Phoenix, Arizona, where he helps employers in distinguishing brokers from advisors in the benefits and healthcare arenas. He received a Bachelor of Arts from UNC Greensboro, where he studied Economics and Environmental Studies, and has studied at Georgetown University in Washington, D.C. and Aarhus Universitet in Aarhus, Denmark.