Judges appointed by President-elect Donald Trump are unlikely to water down fiduciary obligations for Securities and Exchange Commission-registered investment advisors, at least not soon, said experts contacted Thursday by Financial Advisor.
The U.S. Supreme Court said in 1963 that the Investment Advisers Act imposes a strict fiduciary duty on investment advisors. Federal judges have been fleshing out the specifics ever since.
Both the present and immediate past presidents and chief executive officers of the Investment Adviser Association said any change is highly unlikely.
Current IAA chief Karen Barr said the legal obligations for advisors to work in the best interests of their clients is well-enshrined and probably won’t be reconsidered by Trump judges despite the feeling the president-elect could void the Department of Labor’s fiduciary standard for pension fund advisors.
Damon Silvers, who sits on the SEC’s Investor Advisory Committee, said any judicial weakening of the SEC standard would take a long time.
“The immediate threat to investors is regulatory,” said Silvers, whose day job is policy director and special counsel for the AFL-CIO.
Another member of the advisory committee, Barbara Roper, said the fiduciary requirements are so minimal that there would probably be no attempts in courts to lower the bar for fiduciary compliance.
“As long as you disclose your conflicts, the SEC doesn’t force you to mitigate those conflicts, and it certainly doesn’t enforce a meaningful best interest standard,” said Roper, who is also the director of investor protection at the Consumer Federation of America.
Andrew Stoltmann, the incoming president of the Public Investor Arbitration Bar Association, said it is possible Trump-appointed judges could whittle away fiduciary duties, but not substantially modify these duties in the short term.