Due Diligence

NASAA Pushes Congress For Fiduciary Standard

The North American Securities Administrators Association (NASAA) sent a letter to the U.S. Senate and House legislators two weeks ago urging them to adopt a fiduciary standard for all financial advisors as they work to reconcile the financial reform bill. NASAA President Denise Voigt Crawford called it the single most important measure in the bill.

Legislators, led by Christopher Dodd and Barney Frank, are working to complete the reconciliation process before the July 4 recess. NASAA and other consumer and investment adviser groups favor the House version of the bill, which would extend the fiduciary standard to all stockbrokers when they are providing financial advice to retail clients. Broker/dealer firms and insurance companies favor the Senate version, which would require the SEC to study the issue for a year and has no provisions for rulemaking after that.

“The Senate bill calls for a study of issues that have already been studied extensively and does not provide for the SEC to address known disparities in the protections that apply when brokers or insurance agents give investment advice,” writes Voigt Crawford in the letter. She further states that critics who claim that a universal fiduciary standard will limit client choice are wrong. “Customers who want to buy stocks and bonds can continue to do so while those who want investment advice will have access to that information as well,” wrote Crawford. “It will eliminate a regulatory gap that has long exposed investors to abusive sales practices such as incentive programs that encourage brokers to push more costly and poorer performing products over others.”

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