August 29, 2010
Dear Sirs: I am writing you in regards to aspects of the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act and potential unintended consequences if you arbitrarily apply a Fiduciary Standard on all Registered Representatives. While I applaud the attempt to examine potential gaps and overlaps in current regulation and address changes, it is my belief that I, as a registered representative of a Broker-Dealer, am already regulated and overseen to a fault. I believe the suitability requirements imposed on me when I deal with the public have been more than enough to assure they are dealt with fairly in all sales situations. I have been in practice for over 28 years, have over 300 clients and manage the majority of their wealth. I primarily sell commission based products although I do some fee based business as well. I always put my clients interest first and my client files are reviewed on an annual basis by my Broker-Dealer. I have yet to have any complaints as they relate to any advice I have given or products I have sold. I just fail to see how a 'best interests' standard is somehow superior to a 'suitability' standard. There are just too many facets to the sale of a product that can be compared and contrasted when you look 'backwards' at a sales situation that it almost requires one to be able to predict the future. It seems to me that if one does a good job at identifying a clients needs, goals and objectives, and then identifies those products that are 'suitable' for the situation and provides them, then a valuable service has been provided. The fact that a person's situation can and does change, warranting new review and potential changes is not a bad thing, it just is the reality. What works today may not work in the future. So what? That is the purpose of our ongoing review process.
We, unfortunately, spend an inordinate amount of my time and staff time dealing with compliance issues. It seems to me we are already regulated enough. Did the 'suitability standard' help Bernie Madoff's clients? I think not. It is the process of regularly inspecting Advisor's practices and files that has continually proved to be effective and Broker-Dealers already have a very robust system of monitoring their advisor's activities. Why add to this burden?
Again, I applaud the effort to eliminate overlap and fill gaps, but let's limit it to that. New rules and standards are simply not the answer. I hope my input is accepted in the spirit it is intended.
Russell A. Smith