July 30, 2010
I actually read all the comments and agree with the following ones I copied from the text. I think the SEC should seriously look at the comment submitted by Donald Creech, CFP of Port Orchard, WA.
I am a registered representaive and do no want to be looked at as a financial advisor or fiduciary. I think it goes without saying that we all act in the best interests of our clients above anything else, but the reality is NO ONE EVER DOES. Even a fiduciary advisor has to run his practice and make a profit, his decisions about who he will serve, how he will serve them and what he is willing to do for them is always going to be predicated upon that. NO advisor does the same extsive amount of work for the $500,000 client that he would do for the $10million client, it is not practical.
I predict requiring a fiduciary standard will result in less access to professional help for the small investor. Liability insurance costs for Reps and Broker Dealers will rise. Some BDs and Reps will increase the minimum size of accounts they will consider handling leaving smaller investors fewer choices and little or no professional help. Other Reps and BDs, even those who already practice in the manner envisioned by the new standard, will just cease to continue in the business due to the added administrative nuisance that will come about because of added rules. I believe we in the advisor community owe our clients a fiduciary standard of care in providing advice and service.
I am concerned about the potential impact of setting fiduciary standards that make offering and delivering our services to lower income and lower net worth clients unprofitable, which is likely to result in a considerable withdrawal of advisors from that segment of the market.
Standards of care should be established for services rendered to all clients, but there should be consideration for the practical limitations of providing advice and service to certain segments of the client population.
If government would just enforce the current laws it has already put on the books, there are more than enough opportunities to find those who will not/are not taking care of their clients to the best of their ability.
I believe that extending the fiduciary standard to broker-dealers is not ethically possible. Broker-dealers sometimes work with both parties in a transaction, such as when taking a company public. How would it be determined who deserved the fiduciary obligation?
I believe that there should be a definite program of making clear when a person enters into a commercial transaction, such as with a broker-dealer and registered representative and when a person enters into a professional program such as with a RIA where a fiduciary obligation holds.
I THINK THAT THE VERY FACT THAT YOU ARE CONSIDERING NEW TIGHTER STANDARDS ON BROKERS IS LUNACY.THE SYSTEM IS WORKING JUST FINE AS IT IS,BUT DUE TO THE FACT THAT THE MARKET HAS HAD A BIG CORRECTION,UNRELATED TO ANYTHING THAT BROKERS ARE DOING,THE WITCH HUNT AND BLAMECASTING HAS BEGUN,WITH THE EASIEST TARGET BEING THOSE THAT HAD NOTHING TO DO WITH THE PROBLEMS THAT LED TO THE CRASH.
ACTING AS AN INVESTMENT ADVISORY REP.,A BROKER ALREADY ACTS AS A FIDUCIARY.
ACTING AS A BROKER,HE IS NOT,NOR SHOULD HE OR SHE BE A FIDUCIARY,SINCE,SIMPLY PUT,IT IS THE CUSTOMER WHO IS MAKING THE DECISIONS,NOT THE BROKER,WHO IS PROVIDING THE INFORMATION TO HELP A CLIENT MAKE THOSE DECISIONS.WHAT COULD BE CLEARER ?
AS USUAL,CONGRESS AND THE SEC WANT TO ACT LIKE THEY ARE "DOING SOMETHING" SO THE IMPERATIVE TO "CHANGE SOMETHING" HAS BEGUN.
AS THE OLD STORY GOES "IF IT ISN'T BROKE,DON'T FIX IT"
Whether adhering to standards of suitability or fiduciary standards, on the surface, shouldn't matter to a broker. The differences in definition don't seem very apparent. However, questioning a brokers adherence to suitability standards could cost a broker his/her license and a fine. If a broker breaches fiduciary standards I'm sure the penalties are more severe to the broker than those applied in violating suitability standards. I imagine that if the SEC could successfully prosecute a "big" case against a broker the penalties could be larger than the income earnings ability for the typical broker. So, if the broker risks more than his income earning ability will that make him more honest? Or will it convince honest brokers not to risk his reputation and assets against the background of a litigious society. Do you scare away the better quality broker who doesn't want to play "chicken" with the SEC.