July 30, 2010
I work as a series 6, 7, and 63 licensed registered representative and I do not believe that imposing a legal fiduciary standard on registered representatives will benefit consumers. The current suitability standard governing broker-dealers and registered representatives is a robust and heavily enforced standard. My broker-dealer already regularly conducts audits of my business (4 times/year) and also conducts unannounced random audits of all registered representatives. In addition to the audits, my firm has clearly written compliance guidelines that address all facets of my business. These guidelines cover everything from investment suitability to acceptable forms of communication with the public. It currently requires a myriad of forms and disclosures simply to open a new account. These forms provide a very significant level of disclosure to my customers, but this level of compliance requires many hours of time. It is not uncommon for a basic variable annuity application or mutual fund application to require 20-30 pages of forms and disclosures simply to open an account. This complexity leads to added costs that ultimately get passed on to customers. I have been working as a registered representative for 15 years and over that time I have seen a steady increase in regulation and disclosure requirements, but I do not feel that consumers are necessarily any safer. Perhaps more confused, but not safer. Those people who have a criminal intent to steal from their customers always seem to be able to find a way to get it done. More and more regulations only seem to present an undue burden and expense on registered representatives and clients. Regulations like the one being considered will likely lead to increased costs for my errors and omissions coverage and may force me to shift to a fee only planning model to protect myself from liability. This is definitely not the best option for a number of my clients. If the business liabilities become too great, I will have no choice but to close my business. I cannot see how the legal fiduciary standard will do anything meaningful to help customers. The only impact I see of such a proposal is added costs, reduced options, and increased disclosures and complexity. If the current regulations are consistently enforced, customers and the public are more than adequately protected.