“The commission fails to explain why it does not view broker-dealers’ relationships with their customers as relationships of trust and confidence,” said Barb Roper, the CFA’s director of investor protection. “They clearly are. As a result, the commission cannot justify failing to hold them to a fiduciary standard of care.”
The commission is “flouting the will of Congress” by disregarding the framework lawmakers set out in the Dodd-Frank Act, Roper said.
“Congress made clear that the standard should take the form of a uniform fiduciary duty for broker-dealers and investment advisors,” Roper said.
In 2010, Dodd-Frank stated that the standard for brokers and advisors that the SEC must develop should be “the same as” and “no less stringent than” the Investment Advisers Act standard. Further clarifying its intent, Congress specified that the standard “shall be to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer or investment advisor providing the advice.
“In adopting this approach, Congress reflected an awareness of differences in the broker-dealer and investment advisor business models and made clear that the uniform fiduciary standard it prescribed nonetheless was compatible with both,” Roper said.
“In what can only be described as a ‘regulatory veto,’ the commission second-guesses and disregards the clear will of Congress and its prescribed legislative language,” she added.