Subject: File No. S7-25-99
From: Richard Warden
October 28, 2004
Instead of creating a division between brokers and investment advisers based on the nature of the services they offer, this SEC rule proposal would expand the brokers' exclusion from the Advisers Act to include instances in which the broker receives special compensation for advice. This is exactly the wrong direction for the agency to be taking.
I am about to retire, IF possible. My wife and I have two on-line investment accounts. How can I make an informed decision if I can not trust my broker to keep an objective interest in my stocks? How will I know if the broker is giving me unbiased information if the broker may have an interest in promoting a particular stock?
The broker/investment adviser distinction is important for me as an investor, because investment advisors are subject to a higher standard of conduct than brokers. While advisors have a fiduciary duty to place their clients' interests ahead of their own, brokers are subject to a less exacting obligation to make suitable recommendations. Brokers are required to make some disclosure of conflicts of interest, but those requirements are neither as timely nor as extensive as the disclosure requirements that apply to investment advisers.
As an investor I need to know that all financial professionals who offer investment advice are subject to the same rules. To accomplish that, the SEC must define solely incidental advice, and it must do so in a way that limits such advice to the sort of buy this/sell that recommendations which are an inherent part of the broker's sales function.
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