September 22, 2004
I think that the SEC needs to take action and change the current exemptive status granted to broker dealers. There is too much confusion in the minds of consumers as to the roles and responsibilities that effectively stock brokers have.
The SEC could make the process easier by stating that anyone that provides financial services relating to any security must be registered as an RIA, and yet, while that seems easy, it is not really practical. I do not think that the broker that I want to buy a stock from has to be a fiduciary he needs only to have an understanding of my means and a modicum of honesty. The problem comes when that broker attempts to convince me that they indeed have all the financial answers for me and causes me to have faith in their judgment and ability.
I think that the proper solution is simply to pass the rules that a person selling a stock or mutual fund must have the title financial salesperson and that they must refrain from offering financial advice. If a person offers financial advice then they MUST be Registered and serve in a Fiduciary capacity, no ifs and or buts.
In addition brokerage accounts must be clearly labeled in type no smaller than the masthead, that the account is a brokerage account and not an account managed by a Fiduciary.
In addition, a broker cannot be a RIA, so there can no longer be a dual role being filled by one person.
I think that both companies and the consumer should have a choice as to the role that they wish to fill as well as the services that they require and are willing to pay for.
If as a regulatory body you are unable to clearly define the differences between a broker and an RIA, so that the consumer can make an intelligent choice, then for the sake of the investor, you should afford them the maximum protection that they can have, and that is to utilize the services of an RIA.
It is a clear choice, and considering the history of Wall Street and insurance firms, I hope that you opt for further protection and disclosure.