Today, while providing community and consumer advocates’ perspectives on the Obama Administration’s Financial Regulatory Reform Proposal in a hearing before the House Financial Services Committee, representatives from the Consumer Federation of America (CFA) and the U.S. Public Interest Research Group (U.S. PIRG) called on Congress to strengthen proposed legislation that would give the SEC authority to adopt a fiduciary standard for all investment professionals that provide advice.
CFA Legislative Director, Travis Plunkett, specifically warned Congress of the danger of allowing the SEC to adopt a “fiduciary duty lite” standard and recommended the following changes be made to legislation drafted by Treasury :
[T]he words fiduciary duty of care and loyalty that are referenced in the President’s plan should be included in the legislative language itself, so that the fiduciary duty exists in law and not simply through the adoption of SEC rules. … In addition, the SEC should be required, not simply authorized, to adopt the appropriate standards. Finally, Congress should clarify, preferably through the legislation itself but if not through accompanying report language, that: 1) the intent is to ensure no weakening of the fiduciary duty that currently applies to advisers and 2) that a fiduciary duty, once entered into, cannot easily be abandoned; brokers who are covered by a fiduciary duty when giving advice cannot escape that requirement when selling the products to implement that advice.
U.S. PIRG Consumer Program Director, Edmund Mierzwinski, agreed with the CFA’s position that legislation should not include “‘watered down’ language that provides less than the most robust protection for investors” and called on Congress to “mandate that the SEC adopt the highest standard of care in order to avoid overly broad standards and that broker-dealers not be able to escape that higher standard of protection.”
Plunkett’s full testimony on behalf of the CFA can be found at: http://www.house.gov/apps/list/hearing/financialsvcs_dem/travis_plunkett_fsc_testimony_july_16,_2009.pdf, with his remarks on the fiduciary duty specifically beginning at the bottom of page 22 of the prepared testimony. Mierzwinski’s testimony for the U.S. PIRG is available at: http://www.house.gov/apps/list/hearing/financialsvcs_dem/mierzwinski_7.16.09.pdf, and his remarks on fiduciary responsibilities start on page 17.
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