The Financial Planning Coalition has asked the Securities and Exchange Commission to extend the fiduciary standard of care to broker-dealers and other financial professionals who provide personalized investment advice to retail customers.
The Financial Planning Coalition, uniting the CFP Board, the Financial Planning Association, and the National Association of Personal Financial Advisors, advocated in a letter to the SEC establishing a uniform fiduciary standard of care, consistent with the standard currently applied to investment advisers under the Investment Adviser Act of 1940, for all financial professionals who provide personalized investment advice to retail customers, whether those financial professionals are associated with broker-dealers or investment advisers.
The coalition argued that the current standard of care for the provision of personalized investment advice by broker dealers is ineffective; and there is a significant legal and regulatory gap in that broker-dealers can provide the same service as investment advisers at a lower standard of care.
The SEC's findings and recommendations should show that it is "necessary or appropriate in the public interest and for the protection of the retail customers" to establish a fiduciary standard of care for the delivery of personalized investment advice by broker-dealers, according to the group. Furthermore, it added, the SEC should exercise its permissive authority to extend the fiduciary standard to broker-dealers and establish the fiduciary standard in a manner that is true to the statutory languagethat it is the same as the standard of conduct applicable to investment advisers under the Advisers Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act gave the SEC the authority, following a six-month study, to extend the fiduciary standard of care to brokers or dealers who give personalized investment advice to retail customers. The fiduciary standard of care would require broker-dealers to act in the best interest of their clients, which is a higher standard than the suitability standard to which they are currently held.
The coalition's letter came in response to the SEC's request for comments during a 30-day comment period, which closes on August 30, on its "Study Regarding Obligations of Brokers, Dealers and Investment Advisers."
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