September 7, 2004
Based on my experience in the brokerage industry beginning in 1977, exempting registered representatives of brokerage houses from standards of investment advisors would constitute a fraud on the public.
I was an analyst at Paine Webber now UBS 1977-82 and held Series 7 representation so I could talk to clients. After several years of discomfort witht he business, I left brokerage and moved to the buy side. The stock and bond brokers who serviced my accounts would say or do anything to make a sale.
In 1997, I became a Certified Financial Planner and became an investment advisor. I passed the Series 7 again, but gave up brokerage because it was not viable from an ethical or business standpoint.
In 2003, I took training in fiduciary studies and earned the Accredited Investment Fiduciary designation. As a fiduciary, I have been engaged by clients to clean up after brokers who ripped them off.
The bottom line is simple: a broker is a salesman paid by commissions or working in a firm paid by commissions. Unless the firm and the broker are delinked from commisssions, their businesses run on transactions. That is an inherent conflict with fiduciary responsibility. As such, brokers should not be exempt from fiduciary requirements under the 1940 Act.