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U.S. Securities and Exchange Commission

Statement by SEC Commissioner:
Statement in Support of Extending a Fiduciary Duty to Broker-Dealers who Provide Investment Advice


Commissioner Luis A. Aguilar

U.S. Securities and Exchange Commission

Washington, D.C.
May 11, 2010

I unequivocally support the extension of a fiduciary duty to broker-dealers who provide investment advice. It has come to my attention that an excerpt from one of my speeches has been taken out of context to indicate otherwise.

I am issuing this statement to be clear as to my position — it is in the best interests of investors and our markets for broker-dealers who provide investment advice to be held to the fiduciary standard that is currently applied to investment advisers. I have consistently advocated this view.1

Congress passed the Investment Advisers Act of 1940 to protect America's investors from advice-giving intermediaries who have incentives to conceal conflicts and sell investors products that, while suitable, may not be in their best interests. Broker-dealers who provide advisory services to investors should be held to the same fiduciary standard as investment advisers. The fiduciary standard will require them to act in their clients' best interests.

Currently, investors are receiving investment advice from broker-dealers who are not fiduciaries. This has serious and real consequences for investors who may not receive advice that is in their best interest. Moreover, investors may not be told that the broker-dealer registered representative sitting across from them may receive undisclosed compensation from the investment option he or she just recommended.

In my speech delivered March 26, 2010, I also spoke about the need for Congress to allow the SEC to be self-funded. Unlike almost every other financial regulator, the SEC remains without a consistent funding stream. Although the lack of self-funding has imposed challenges on the SEC, the SEC has been and remains a staunch protector of investors. The SEC is the only securities regulator with the necessary experience in dealing with the principles-based regime of the Investment Advisers Act of 1940 and has a long history of bringing cases against fiduciaries that have breached their fiduciary duties to their clients. In fact, the SEC has administered this regime for decades. No other regulator or SRO has this experience.

I support legislation to protect investors and support extending the fiduciary duty to broker-dealers who provide investment advice.



Modified: 05/11/2010