The House Financial Services Committee is set to continue its markup of key regulatory reform legislation and specifically will meet next Tuesday to consider the Investor Protection Act, key legislation that would extend the fiduciary duty to broker-dealers who provide investment advice. In anticipation of the markup, a manager's amendment to the Investor Protection Act was released earlier this week.
The amendment seeks to remedy "drafting errors" and "improve the intent of the bill." Most notable to the proposed expansion of the fiduciary duty is a clarification to the statutory language that would ensure that any standard of conduct adopted by the SEC for brokers, dealers, and investor advisors will be as strong as the current fiduciary standard applied to investment advisors. In addition, any disclosure rules adopted by the SEC would also need to address disclosure of conflicts of interest between the investment professional and the investor.
Despite significant movement by the House Financial Services Committee to complete a legislative package by November, observers are still questioning whether financial reform will get done this year due to the Senate's focus on healthcare reform. In response to these concerns, Senator Carl Levin stated he believes there is enough momentum in the Senate to complete regulatory reform by year end. Levin specifically cited the strong leadership of Senate Banking Committee Chair Christopher Dodd and public anger over Wall Street abuses as the driving forces that will move regulatory reform toward completion.
Once legislation is complete, it will be up to regulatory agencies to carry the torch next year and implement changes. The SEC, in particular, provided another signal this week that it is willing take up the fiduciary issue and adopt a consistent standard for all investment professionals who provide personalized advice to investors. Indeed, in a joint report issued with the CFTC, the SEC called for a fiduciary duty to be applied to advisors who recommend commodities to investors. The recommendation specifically seeks to further reduce confusion in the marketplace about financial professionals' duties and apply a uniform fiduciary standard of care to all professionals providing similar services. Thus, it appears that legislators and regulators are eager to move the broad implementation of a fiduciary standard forward.
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