September 17, 2010
As a former securities regulator, prosecutor and long term practitioner representing many investors in FINRA arbitration proceedings, This issue is very important to me as a practitioner, to my clients, and to all investors. I urge the SEC to adopt a fiduciary standard for all financial professionals who provide personalized investment advice.
Currently, investors may be getting personalized advice from an investment adviser or a securities broker, but the advice may be given under two different investor protection standards. The investment adviser, under a fiduciary obligation, is acting in the best interests of the client, while the broker must simply be making suitable recommendations, unless other factors are present and which must be argued. It simply doesn't make sense to have two different standards for what amounts to the same service. The Investors only learn of this purely technical distinction, not from their broker, but from their attorney, when there is a problem and they must file a claim against a broker or brokerage house. Countless clients understandably cannot believe there may be two different standards which may be argued by a brokerage firm.
Investors deserve a common standard, without having to describe the relationship etc they had with the broker, and their background, simply so as to be afforded a fiduciary duty and they should not be left to guess what kind of protection they are being afforded. The standard for providing investment advice should be clearly the same for brokers and advisers no matter what relationship the client has with the broker or the investor's background etc: to act in the investors best interests. It is what investors deserve and what they should be able to expect.
I understand that Congress has protected commission-based compensation and made other provision for allowing existing business models to continue, consistent with putting investors interests first. With those concerns addressed, I think the SEC must take this opportunity to exercise its authority and get brokers and advisers on the same page when it comes to providing advice.
Requiring everyone without exception, who provides personalized investment advice, to act in the investors best interests will help restore the faith and confidence in our markets and financial professionals that is so desperately needed. This is the most common sense consumer initiative the SEC can take and I strongly encourage you to take the opportunity to provide this simple, meaningful investor protection.
Stuart D. Meissner Esq.