The SEC’s investor advocate has warned that if the agency’s commissioners impose a fiduciary duty on broker-dealers, it could harm investors in two ways.
First, the agency’s Rick Fleming said, such an obligation could lead to a weakening of the fiduciary standard for SEC-registered RIAs.
Second, instead of reducing confusion in the standard of care obligations of RIAs and broker-dealers, an imposed fiduciary duty could increase it.
“A poorly designed rule could cause even greater confusion by purporting to give investors the protection of a ‘fiduciary duty’ that would, in fact, be less stringent than the traditional fiduciary duty that applies in other relationships of trust,” Fleming said in a report issued Thursday that included his priorities for the coming SEC fiscal year starting October 1.
Regarding his plans to advise the commission on the standard of care, Fleming said he will encourage the SEC to pursue a thoughtful approach to this complex issue so the commission can create stronger protections for investors while avoiding unintended consequences.
Fleming, meanwhile, also urged the commission to take a break on rule making for the Dodd-Frank Act and JOBS Act.
He said the time would be better spent on issues that have gone fallow for too long—such as a summary prospectus for variable annuities and improvements to equity market structure regulations.