August 24, 2010
I completely disagree with the premise that the legal fiduciary duty governing investment advisers provides greater investor protection than the suitability standard governing broker-dealers. I disagree that the fiduciary standard has protected consumers better. Basically, the fiduciary standard looks back and enforces breaches retroactively through SEC enforcement or private lawsuits. The suitability standard looks forward and tries to prevent harm to consumers through ongoing and frequent FINRA and broker-dealer audits and compliance processes.
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. Broker dealers audit registered representatives office every year and require attendance at compliance meetings annually. All business the registered representative is involved in is subject to compliance standards. Our office currently spends 5 to 6 hours a month on compliance reporting, monitoring, and updates. This is valuable time that takes away from our ability to monitor and meet with clients concerning their goals and investments.
The vast majority of registered representatives, insurance agents, and advisors ALWAYS " act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser providing the advice." Please do not allow a few unscrupulous people's actions cause rules to be enacted that only make it more difficult for consumers to be served.
The Act does not define what the rules are for compliance with a legal "best interest" standard - thus subjecting registered representatives, agents, and advisors to the potential of never ending lawsuits. For example, is "best" the cheapest recommended product? The "best" premium relative to the benefit of the product? The product with the "best" historic underwriting and service standards? Is it the one from the carrier with the "best" rating? The fiduciary standard in essence adds a vague legal liability standard that looks back (sometimes after many years) and is enforced after the fact by the SEC or trial lawyers who have perfect vision in hindsight.
I urge you to drop this Fiduciary Standard on Registered Representatives.
Thank you for your consideration.