From the March 2011 issue of Benefits Selling Magazine •Subscribe!

SEC shakes up fiduciary standards

Securities regulators recently took a step to improve investor protection by recommending a universal fiduciary standard for broker-dealers and advisors that give investment advice to retail customers.
As mandated by the Dodd-Frank Act, the Securities and Exchange Commission submitted its study to lawmakers, which suggested subjecting broker-dealers to standards that are "no less stringent" than what advisors must meet when they recommend securities to investors.

Broker-dealers are required only to recommend "suitable" products, but the SEC staff calls for requiring brokers to act as fiduciaries and ensure their clients' best interests are ahead of their own.
According to SEC staff, there's a need for a unified regulatory regime because investors often don't understand and are confused by the roles played by investment advisors and broker-dealers.

"Many investors are also confused by the standards of care that apply to investment advisers and broker-dealers" when providing personalized investment advice about securities, the study notes. "Retail investors should not have to parse through legal distinctions to determine" the type of advice they are entitled to receive.

"Instead, retail customers should be protected uniformly when receiving personalized investment advice about securities regardless of whether they choose to work with an investment adviser or a broker-dealer."

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