September 30, 2004
Broker/dealers, particulary those who operate through networking arrangements on bank premises, should not have any exemption from fiduciary responsibilities to consumers. In fact, brokers doing business on bank premises should be held to the highest standards of fiduciary duty. In addition, banks, as institutions of trust, should have fiduciary responsibilities for their networking arrangments and on-premise broker actions. Bank fiduciary reponsibility should extend to bank employee relationships with on-premise brokers as well.
See S7-26-04 csmith083004 for details regarding a brokers actions on bank premises that substantially impacted an elderly persons financial stability. These details show how the lack of fiduciary duty enabled both a broker operating on bank premises and the bank to escape responsibility for their actions to a customer. It also shows how lax regulatory responses further enable questionable practices.