August 11, 2010
I am an attorney who primarily represents individual investors but also works with the industry in matters involving compliance and regulatory issues.
I believe that raising the bar on registered reps is in the best interests of the investing public. Many investors wrongly believe that this standard of care already exists and are surprised to find out later that their broker is not required to put the interests of his or her clients ahead of their own.
I appreciate and respect the comments from the industry citin increased costs and lack of entry into the system for younger, less affluent clients if the standard is raised. However, I do not see that happening. The system will react and adapt to a higher standard of care if one is mandated. The industry will find a way to serve those for whom a fee-based RIA relationship may be out of reach. Furthermore, the argument that costs associated with increased compliance will hurt brokers fails to take into account the fact that what we are talkin about is not more compliance, but rather different compliance. Surely the firms can implement new procedures to supplement current compliance review and examinations.
If the goal of these laws/regulations is the protection of investors, than how can anyone argue that increasing the standard of care to a fiduciary standard is a bad idea.
In the event that brokers / RRs are not held to this higher standard, the Commission and the industry must undertake an inititive to fully educate and inform investors of the differences between brokers and financial advisors. At this time, the investing public is not aware that these groups are different.