August 24, 2010
Attn: US SEC
Please note the following important position in regards to the SEC imposing a misguided fiduciary responsibility on Broker/Dealers and Registered Representatives.
The SECs proposal to require each RR and Broker/Dealer to act as a fiduciary is a misguided attempt to create safeguards protecting the public against poor financial decisions. Each financial institution has a suitability standard that protects consumers from making decisions that can negatively impact them financially. When these suitability measures are abused by financial institutions the SEC and other Government Departments step in and appropriately regulate the matter on behalf of the consumer.
Additional regulatory efforts such as the SEC making each RR a fiduciary will have adverse affects to the consumer. Two specific examples of an unintended consequence for the consumer are:
1. Financially strong, well capitalized institutions will be forced to commoditize products to fit pricing structures of financially weak, poorly capitalized institutions that are using price as the means to procure more business and sales of its products. This weakens financial products and their value to consumers.
2. Broker/Dealers and Registered Representatives will begin complex fee structure arrangements to account for the additional staff and research requirement expenses incurred by being fiduciaries. This negatively impacts consumers who are looking for sound financial advice from Registered Representatives who typically are not fee based because they are paid directly by the financial institutions for which they represent. A consumer not seeking professional advice due to fees charged is akin to a consumer not taking a required prescription because the cost is too high.
Broker/Dealers and Registered Representatives are important to the financial health of consumers looking to secure their financial futures. Please do not make a mistake and impose a fiduciary liability on them which ultimately affects the public negatively.