Due Diligence

Vote On Fiduciary Duty Delayed, Dodd and Johnson Work On Compromise

A final decision on the fate of the fiduciary standard in Wall Street reform legislation was delayed Wednesday evening. Around 6pm, Senator Christopher Dodd said that he and Senator Tim Johnson would not be prepared to issue a counter-offer on the subject for another day or two.

Earlier today, the House committee members proposed that Senate members adopt House language on fiduciary duty in the final bill. The House version of reform legislation gives the SEC rulemaking authority to extend fiduciary duty to all financial advisors when they provide securities recommendations to individual investors. The Senate version of the bill requires that the SEC study the effects of extending fiduciary duty to stockbrokers, without giving the regulator rulemaking authority to extend the fiduciary duty to all financial advisors.

The Senate committee members did not reject the House proposal on fiduciary duty outright, however, as it did with some other investor protection provisions, which suggests they may offer a compromise solution. Perhaps a study plus rulemaking authority for the SEC?

The Senate conferees did accept 26 of 38 House investor protection amendments offered Wednesday without any modification, including, among other things, requiring the GAO to study SEC employees who take jobs in the securities industry, establishing a time table for SEC investigations and examinations, increasing penalties for fraud, enhancing SEC ability to bring enforcement actions against people who aid and abet fraud and studying SEC resources for investment adviser examinations.

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