August 3, 2010
Thank you for the opportunity to give you my comments on the proposed increased regulation:
Overall, I do not agree. I take great time to propose suitable investments for my clients and feel it is the SEC that does not enforce 1933-1934 Acts or Sarbanes Oxley, etc etc which allow fraudulent companies to trade on our open securities mkts...that is the real problem
Compliance costs-both in terms of finances and time-are high, and those costs are eventually felt by clients. Adding another layer of regulation means another layer of compliance, and even more costs to clients. My own EO insurance, even when I have no violations, has increased from $500 in 1997 to $3000 in 2010, and this would surely cause it to double again.
I do not understand why increased regulation is necessary for advisorswhen I already have to comply with 24 hrs of CE each two years for my CO insurance licensing and have to pay $3000 for EO insurance and 20% of my commissions (approx $15000) to my broker to ensure I am in compliance. I also have to go through annual broker compliance of about 10 hrs per yr, 16 hrs of long term insurance initial trng and 5 more hrs every two years, and 2 hrs of ethics. In addition, I spend 10-20 hrs per client getting their financial information so I can make a suitable recommendation and then my broker spends at least 2 hrs per transaction looking over everything as well. Therefore, I feel the process is already exhaustive and time consuming and expensive, which makes it difficult for me to to stay in business. In the meantime, criminals in MCI,Adelphia,Enron,Tyco, AIG, banks, Madoff, etc etc are allowed to go unmonitored until they create crises and ruin all of our credibility with our clients.
I feel it would be totally unfair to make me a fiduciary instead of keeping me as an investment advisor with suitability standards when I have no control over what the SEC allows its publicly traded companies to do and then holds me accountable...I simply don't understand how this would help although it would increase my costs and therefore consumer costs as well.
It is not clear that a fee-only model will result in better, unbiased advice because clients all have different situations and preferences on their costs structures. In fact, it is possible this could raise their costs and I could lose business from clients who cannot affordfee for service fees.
I am already an investment advisor rep who charges fee based fees to some clients and commissions to others, and I do not understand how one over the other would be more protective for me or my clients when the suitability standard already applies to everything I do.
I sincerely hope the SEC will conside enforcing long existing laws and watch from the top as we investment advisors are already being scrutinized and regulated from the bottom.