SEC Chairman Schapiro is currently testifying before the House Committee on Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises. Here is what she said on fiduciary duty in relation to the Treasury’s proposed legislative language:
We are also closely examining the broker-dealer and investment adviser regulatory regimes and assessing how they can best be harmonized and improved for the benefit of investors. Many investors do not recognize the differences in standards of conduct or the regulatory protections applicable to broker-dealers and investment advisers. It is essential that when investors receive similar services from similar financial service providers, the service providers should be subject to the same standard of conduct and regulatory requirements, regardless of the label attached to the providers. I therefore believe that all financial service providers that provide personalized investment advice about securities should owe a fiduciary duty to their customers or clients and be subject to equivalent regulation. I support the standard contained in the bill Treasury recently put forth, which would require broker-dealers and investment advisers to act solely in the interests of their customers or clients when providing investment advice.
Also of note is that she highlighted the limited resources the SEC has to oversee existing registered IAs, and that requiring hedge fund advisers to register would require an increase in SEC resources. In my opinion, this could play into the debate on whether advisers should be subject to SRO oversight. Her full testimony is available at: http://www.sec.gov/news/testimony/2009/ts071409mls.htm.
Hearings on regulatory reform continue throughout the week, view the House schedule here: http://financialservices.house.gov/schedule.html and the Senate schedule here: http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Home.
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