July 30, 2010
I have read the proposal of a Fiduciary Standard being imposed on the Financial Advisory community as it applies to our representatation of our clients. I find this to be a misguided approach from those who do not understand the financial standards of this business. By the time a breach has occured it is too late, i.e., Madoff and Stanton to correct the wrong. By applying such a standard to our practices leaves us in a position of not being able to prevent such breaches. The real issue is enforcement. If the enforcement community is not going to address their responsibilities then it is left to the courts to do the job the SEC and others failed to do, refer to Madoff Stanton. These were failures at the highest levels and the application of fiduciary standards would not have prevented the occurences. Fiduciary standards only create more legal remedies which will not put the public back whole, again refer to Madoff Stanton. Only by the proper oversight could these have been addressed earlier. When we spend all of our time on the small cases then we miss the bigger issues. Volume of prosecutions is not the solution, neither is requiring fiduciary standards. Our Broker/Dealer community does an excellent job of policing the field force. It is the Independent Money Managers that may need more policing, but again, requiring fiduciary standards will not prevent malfeasance.
As a member of the financial community, my responsibility to my clients is to understand their needs and objectives BEFORE making recommendations. Ethically I must place their concerns and interest above mine. That is more of a stingent standard than is a fiduciary standard. I challenge the SEC to do its job of oversight and addressing the warnings reported, such as what occurred with both Madoff Stanton and not fail to investigate. It is as with other situations, we do not need more laws, but better enforcement and diligence on the part of the those charged with that enforcement.
HAVE A GOO DAY
Jesse Hauptrief