August 24, 2010
I have been a registered representative for close to 20 years and investment advisor representative for over 10.
I am writing to oppose the SEC imposing the fiduciary standard on broker-dealers and their registered representatives.
As registered representative, I am required by Finra and my broker dealer to make sure the investments that I sell to a client are suitable for that particular client. This suitability standard requires me to fill out an account information form for each client. This account information form ask about a client's investment goals, age, income, liquid assets, invesment experience and when will the client need the money back that they are investing. A copy of this account information form is kept in the client's file and the original is sent to my broker dealer to review to make sure the investment is suitable for that particular client. There are other forms in additon to the account information form that need to be submitted to my broker dealer and kept in the client.
In addtion to the oversight I receive when I sell a client an investment, I have a broker dealer audit at least once a year and audits and meeting with my OSJ, office of Supervisory Jurisdiction, on a more frequent basis. These audits entail close inspection of my client files and the review of all the policies and proceedures that I need to follow in order be compliant and serve the best interests of my clients.
The suitability standard imposed by Finra on broker-dealers and their registered representatives is a proactive standard that looks forward and tries to prevent harm to consumers before it happens with the ongoing audits and compliance processes in place that I have already cited. In contrast, the fiduciary standard is a reactive model that enforces breaches after the fact with SEC enforcement and/or private lawsuits.
I have always been a big believer that one size does not fit all and it seems to me the SEC is trying to do just that. The fiduciary standard is certainly a very legitimate model but I also feel the suitablity standard is equally legitimate.