August 16, 2010
The suitability standard governing broker-dealers and registered representatives is a robust and heavily enforced standard. Compliance costs-both in terms of finances and time-are high, and those costs are eventually felt by clients. Adding another layer of regulation means another layer of compliance, and even more cost to clients. Our firm recently went from one compliance person to three, requiring additional licensing for previously unlicensed staff members.
Our advisors are already acting in the "best interest" of their clients and the Act does not define what the rules are for compliance with a legal "best interest" standard - thus subjecting registered representatives to the potential of never ending lawsuits. What is "best" for the client - the cheapest product the lowest premium the product with the "best" historical underwriting and services the one from the carrier with the "best" rating?
We believe the fiduciary standard potentially adds an undefined legal liability standard that may look back (even after many years) and be enforced after the fact by the SEC or trial lawyers who have what they believe to be perfect vision in hindsight.
Additional regulation is not required for the already heavily-regulated registered representatives.