Subject: File No. 4-606
From: Brian Ness

July 31, 2010

I believe the fiduciary standard, while well-intentioned, would negatively impact consumers. Basically, the fiduciary standard looks back and enforces breaches retroactively through SEC enforcement or private lawsuits, when it's too late for the consumers to be indemnified. The suitability standard looks forward and tries to prevent harm to consumers through ongoing and frequent FINRA and broker-dealer audits and compliance processes. Both standards have a strong ethical purpose: to serve the clients' best interests, not the brokers'. Unfortunately, the Act does not define what the rules are for compliance with a legal best interest standard - thus subjecting registered representatives to the potential of never ending lawsuits. For example, is best the cheapest recommended product? The best premium relative to the benefit of the product? The product with the best historic underwriting and service standards? Is it the one from the carrier with the best rating? The fiduciary standard in essence adds a vague legal liability standard that looks back (sometimes after many years) and is enforced after the fact by the SEC or trial lawyers who have perfect vision in hindsight. This backward process will not improve consumers' financial health. When it comes down to it, making rules is easy, enforcing rules is difficult. The SEC needs to commit to the difficult job of enforcing existing regulation, because its failures allowed these public financial scandals to continue unabated far too long. If it doesn't improve, the public will be unprotected no matter what regulations are in force.