The securities industry supports a uniform fiduciary standard for brokers and advisers as being consistent with current best practices and serving the best interest of retail customers. However, in testimony before the House Capital Markets subcommittee, SIFMA conditioned its support on the uniform standard of care being achieved it in a manner that protects investors, preserves investor choice, is cost-effective and business model neutral, and avoids regulatory duplication or
SIFMA believes that Congress explicitly intended for the SEC to craft a uniform fiduciary standard that not only protects investors, but also preserves investor choice and access to cost-effective financial products and services and is adaptable to the substantially different operating models of broker-dealers and investment advisers. Congress expressly provided the SEC with the statutory tools necessary to achieve these inextricably linked goals.
Specifically, Section 913 of Dodd-Frank requires that the uniform fiduciary standard be “no less stringent than” the general fiduciary duty implied under the Advisers Act, noted SIFMA, thus granting the SEC the latitude and ability to establish a separate, unique uniform fiduciary standard that is appropriately tailored to the business models of broker-dealers. The plain language of Section 913, together with the legislative history of Dodd-Frank, makes clear that the “no less stringent” language does not require the SEC to impose the Advisers Act standard on broker-dealers.
In support of this position, SIFMA cited a recent letter from Rep. Barney Frank to SEC Chairman Mary Schapiro, in which he said that if Congress intended the SEC to simply copy the Advisers Act and apply it to broker-dealers, it would have simply repealed the broker-dealer exemption, an approach Congress considered but rejected. The new standard contemplated by Congress is intended to recognize and adapt the differences between broker-dealers and investment advisers. emphasized the Representative.
In SIFMA's view, a mere overlay of the Investment Advisers Act onto broker-dealers would negatively affect client choice, product access, and affordability of customer services and, thus, by definition, would not be in the best interest of retail
customers. Imposing the Advisers Act standard would also be problematic for broker-dealers from a commercial, legal, compliance, and supervisory perspective, thereby undercutting the SEC’s stated intent to take a “business model neutral” approach.
On July 14, 2011, SIFMA filed a detailed letter with the SEC that offers a framework and principles for rulemaking under Section 913 of Dodd-Frank. The Framework Letter says that SEC should have five key components, including enunciating the core principles of the uniform fiduciary standard, articulating the scope of obligations under the uniform fiduciary standard. defining “personalized investment advice, ''providing clear guidance regarding disclosure that would satisfy the uniform fiduciary standard, and preserving principal transactions and proprietary products. SIFMA envisions that the principles would be articulated through comprehensive SEC rulemaking as a uniform standard of conduct that is “no less stringent than” the
general fiduciary duty implied under the Advisers Act.
The SIFMA Framework Letter also explains in detail why a wholesale extension to broker-dealers of the case law, regulatory guidance, and other legal precedent under the Advisers Act would result in a host of adverse consequences for retail customers.