(Dow Jones) The securities industry should begin to prepare for a fiduciary standard even if lawmakers have put off any such move in the short term, the chief executive of the Financial Industry Regulatory Authority said this week.

Richard Ketchum told an audience of compliance professionals that, while a proposed financial-overhaul bill unveiled in the Senate on Monday didn't require such a move, it and a bill passed by the House of Representatives in late 2009 signal a trend toward higher standards.

The bill from Senate Banking Committee Chairman Chistopher Dodd (D-Conn.) only requires a "benefits and feasibility" study about extending the fiduciary standard to securities brokers. The House bill would direct the SEC to develop rules to establish such a standard for brokers. The standard, which requires acting always in a client's best interest, now applies only to registered investment advisors. Brokers face a lesser standard and must only sell products they deem suitable to a client.

A clause in Dodd's bill gives the SEC one year to complete its study and then, if it finds regulatory gaps, another year to start making rules. "I'm pleased to see it's only a year and not a lifetime," said Ketchum, who spoke at an event sponsored by the Securities Industry and Financial Markets Association Compliance & Legal Society.

Ketchum's views on the future of a possible fiduciary standard for certain brokers seemed optimistic in contrast to the deep concerns expressed by fiduciary advocates when the study clause was put in Dodd's bill, replacing language that would have required the SEC to determine now just how to apply the fiduciary standard.

Kristina Fausti, special adviser to The Committee for the Fiduciary Standard, an advocacy group, told reporters on Monday that the SEC's authority to ultimately develop a fiduciary standard for certain brokers is limited without statutory backing.

The agency can, for example, impose disclosure requirements for brokers through rule-making "that could have a fiduciary flavor," said Fausti. But brokers still wouldn't have a statutory duty to put investors first, she said.

Ketchum, on Tuesday, however, discussed the standard as if its ultimate application to the brokerage industry remains likely.

"The common fiduciary standard is neither impossible, illogical, or even that scary," he said.

Brokerages should review their businesses for conflicts of interest during the time that lawmakers debate legislation and the SEC conducts its study, a period of about 18 months, said Ketchum. "It is a critical step for increasing your ability to avoid risk," he said.

He also urged brokerages to start taking steps toward improving client disclosures and documenting investment recommendations in a manner the SEC may ultimately require upon completing the study or rule-making that may be required by Congress. Ketchum said brokerages should adopt clear disclosures to present to investors when they buy securities, instead of disclosures that investors sign when they open accounts.

One option, he said, could be to develop Website disclosures that are clear and simple for investors to understand, while providing links to more complicated details for customers interested in that information.

"You want your customers to understand but you also want to protect yourselves," he said.

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