Wednesday, March 18, 2015

Quick Note # 1: SEC Chairwoman Favors Extending Fiduciary Standard to Brokers

Quick Note # 1: SEC Chairwoman Favors Extending Fiduciary Standard to Brokers[1]

In my News & Observer column on February 21, 2015 (“Think twice before rolling over your 401(k) into an IRA”[2]), I wrote about the U.S. Department of Labor’s pending effort to apply a fiduciary standard of conduct to brokers who advise clients on IRAs.  In a recent speech, SEC Chairwoman Mary Jo White endorsed the idea of applying a fiduciary standard to all brokerage activity. 

Two quick points.  First it makes complete sense to have one standard of conduct that applies to all advice furnished by brokers to clients.  Second, if the SEC actually proposes a rule, this is going to be a huge political fight.  If you want to know why Wall Street writes big checks to political campaigns and lobbyists, Ms. White’s proposal is the answer.  The current “suitability” standard for brokerage conduct gives the industry a great deal of leeway and shields it from many client complaints.

I’m glad the Chairwoman is in favor of a higher standard of conduct.  I doubt it will be enacted during her tenure.



[1] http://www.nytimes.com/2015/03/18/business/dealbook/sec-chief-voices-support-for-higher-advice-standard-for-brokers.html?ref=business
[2] http://www.newsobserver.com/news/business/article10879385.html

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