Long before the current discussion on regulatory reform began, the issue of whether a fiduciary standard should apply across the board to all investment advice givers was already being debated. But with the release of the Obama plan in June, the debate has quickly become centered on how to define the fiduciary standard.
As we recently posted, the Committee for the Fiduciary Standard has focused it's efforts on advancing "the authentic fiduciary standard" and has identified five core fiduciary principles. This position is meant to highlight the fact that calling for a fiduciary standard for advisers is not enough. Rather, legislators and regulators should seek to apply the fiduciary standard, which has been established under law (ERISA, UPIA, UPMIFA, MPERS, Investment Advisers Act, etc.) and regulation. Simply put, the "authentic" standard should not be diluted and should be faithfully applied.
This is a powerful message that was already put forth by SEC Commissioner Aguilar prior to the formation of the Committee for the Fiduciary Standard and it is quickly gaining momentum. Just last week, the FPA, NAPFA, IAA, and CFP Board sent a joint letter urging the newly formed SEC Investor Advisory Committee to consider recommending the clear and unambiguous extension of the principles-based fiduciary duty under the Investment Advisers Act to brokers who provide investment advice, rather than seeking to identify a newer precise definition of fiduciary duty.
At a time when change is being widely promoted by lawmakers, the discussion surrounding the fiduciary standard serves as an important reminder that there is already a strong foundation in law that could better protect investors if it was more widely applied. More importantly, the application of the existing fiduciary standard will ensure that all investors who seek advice from investment professionals will receive the core protections they already believe they are getting.
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