September 21, 2004
Thanks you for the opportunity to comment on this matter. I have been a fiduciary advisor since 1977 operating as Wesban Financial Advisors. I have some conclusions about the industry to which I have come after several decades of struggling to serve the client first One of those conclusions relates to the so called Merrill exemption about which the SEC has solicited comments.
The exemption should be withdrawn immediately. The existence of the exemption is a scandal on the order of recent fraudulent activity among certain mutual funds, corporate officer failures and the CBS/Rather negligence.
The 1940 securities act clearly establishes advisors as separate and distinct from securities salespersons authorized by the 1933 act. The exemption overrules that distinction. Those of us who practice as fiduciaries/fee-only advisors National Association of Personal Financial Planners require protections for clients above and beyond the standards set by the legislation. The public has come to appreciate those standards and seeks to be served by fiduciaries in increasing numbers. The tide in favor of Fee-only practices has become so obvious that the Broker/Dealer community now seeks to appear as if they too are fiduciaries in marketing their services to unsuspecting customers. Although the 1933 and 1940 acts define customers of salespersons in contrast with clients of fiduciaries the present exemption allows customers to be misled in seeking the protection which the law ought to provide.
There is nothing illegal or immoral about good salesmanship. The conflict of interest inherent in the Broker/Dealer relationship with customers who may buy only what that firm has to offer to avoid an off book transaction is clear. To offer a rule which gives customers confidence that the system is other than the law allows places the SEC in the same position as certain Investment Company officers allowing special and unwarranted privileges at the expense of those who placed their confidence in that system
I would plead with the Commission to terminate the exemption and in the process make clear to the public the meaning of various contrasting pairs of terms in our businesses which have now become blurred or even meaningless: client versus customer selling versus advising fiduciary versus broker independent versus selling agreement commission versus Fee-only and many other similar contrasting terms. Indeed, I would plead for a glossary of terms which brokers and advisors must present to prospective customers or clients as part of their initial evaluation conference. This would serve the investing public much more effectively than an exemption which serves only to confuse the very public the SEC was placed in being to protect
Peter W.Weston Ed.D, CFP