NU Online News Service, Jan. 25, 1:16 p.m. EST
The Independent Insurance Agents and Brokers of America (IIABA) said it is "unnecessary" to impose a uniform fiduciary standard on the sale of investment products, as the Securities and Exchange Commission recommended in a new study.
The IIABA said it is disappointed with the SEC staff recommendation to apply a new fiduciary standard to broker-dealers. The broker-dealers already adhere to a "rigorous and strictly enforced suitability standard," Charles Symington, IIABA senior vice president of government affairs, said in a statement.
"We believe the unwarranted application of this burdensome standard will only serve to lessen the number of qualified financial advisors serving middle-class Americans as many main street businesses currently offering this securities advice as part of broader service to consumers will simply cease these operations given the uncertainty associated with such an amorphous and subjective standard," Mr. Symington said.
Furthermore, the SEC study said that "when broker-dealers and investment advisors are performing the same or substantially similar functions, the SEC should consider whether to harmonize the regulatory protections applicable to such functions."
The study was mandated by the Dodd-Frank financial services reform law. It will be presented to the Senate Banking Committee and the House Financial Services Committee, but the SEC will retain full authority to proceed to implement the study's recommendations.
Ira Hammerman, general counsel for the Securities Industry and Financial Markets Association (SIFMA), which represents broker-dealers, said the SEC now needs to issue interpretive guidance that will allow firms to make this standard operational in a way that does not lead to "business model winners and losers."
Mr. Hammerman said while he supports the study's conclusions, SIFMA remains concerned about the possible effects on broker-dealers' ability to serve customers as this approach is developed. He said the association will continue to work with the SEC to ensure that the broker-dealer role is not hindered.
Mr. Hammerman added, "We also appreciate the commission's recognition that as a fiduciary duty is applied to brokers and investment advisors, such a standard should not limit investor choice."
Two Republican SEC commissioners, Kathleen Casey and Troy Paredes, voiced strong opposition to the recommendation.
They said that while the study recommends a new uniform fiduciary duty standard and harmonization of two disparate regulatory regimes, "it does so without adequate articulation or substantiation of the problems that would purportedly be addressed via that regulation"
The study stated that the SEC should adopt regulations ensuring that the standard of conduct for all brokers, dealers and investment advisors "shall be to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment advisor providing the advice."
It added that in implementing a uniform fiduciary standard, the SEC "should engage in rulemaking and/or issue interpretive guidance addressing the components of the uniform fiduciary standard: the duties of loyalty and care."
In implementing the standard, the SEC report said the commissioners "should identify specific examples of potentially relevant and common material conflicts of interest in order to facilitate a smooth transition to the new standard by broker-dealers and consistent interpretations by broker-dealers and investment advisors."
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