September 16, 2004
I am writing to oppose the rule permitting stockbrokers to hold themselves out the public as financial planners under the so-called "incidental" rule.
It does not seem to have occurred to the SEC that this rule undercuts and undermines your own position of authority with the investing public. The SEC came into existence with the express purpose of protecting the public, and as such the SEC has a fiduciary responsibility to protect the public interest. Investment advisors who register with the SEC likewise fall under the standard of the fiduciary responsibility for their clients. You are a fiduciary responsible for monitoring other fiduciaries.
What does the "incidental" rule represent? Is it consistent with the fiduciary role of the SEC and investment advisors? Not in the least. Pretending that stockbrokers may be financial planners institutes not a level playing field, but rather an unlevel playing field. This is patently deceptive.
Stockbrokers offering financial plans are not financial planners under the SEC's own rules. Stockbrokers do not have to disclose any financial incentive received for selling particular securities or any disciplinary issues faced with regulators. Stockbrokers are not required to disclose methods of compensation or any conflicts of interest. Furthermore, stockbrokers are not bound by the fiduciary standard to put clients' interests first.
By sanctioning the the "incidental" rule, the SEC makes itself a party to a sham and deception. Would the government permit a paralegal to set up shop as a fully qualified attorney, or a nurse practitioner to advertise him/herself as a fully qualified physician? Of course not. Yet that is exactly what the SEC is doing by allowing stockbrokers to set themselves up as financial planners. You are supposed to be protecting the interests of the investing public, not permitting a sham to be perpetrated on the American investor. After the various frauds perpetrated on the investing public in recent years, it is unconscionable that such a travesty should be allowed to persist.
If stockbrokers want to hold themselves out as financial planners, they should have to live up to the SEC's own rules and register as Investment Advisers under the Act of 1940.
As an investor, I find it odd, not to say alarming, that the SEC seems to be so compliant in the matter of violating its own rules. What did you imagine you were doing?
It is certainly time, given the Enrons, Worldcoms, etc., of the past few years, for the SEC to get its own house in order. This means taking your fiduciary responsibility seriously and enforcing your own rules, not watering them down or foisting a deliberate deception on the public. Please recall why your Commission exists in the first place.
Steven F. Wertime, Ph.D.
310 No. Underwood St.
Falls Church, VA 22046