Home -> Law Blog Directory -> Corporate & Securities Law Blogs -> Jim Hamilton's World of Securities Regulation

Corporate & Securities Law

: Jim Hamilton's World of Securities Regulation

Senior House Leaders Provide Legislative History on Sec. 913 of Dodd-Frank

By Jim Hamilton

The floor debates and statements on June 30, 2010, the day the House passed the Dodd-Frank Act, yielded two significant statements by two senior members of the Financial Services Committee on Sec 913 of the Act. Particularly important is the part of Rep. Kanjorski?s statement in which he lists what he feels the elements of a uniform federal fiduciary standard for brokers and advisers should be.

According to Rep. Spencer Bachus, Ranking Member on the Financial Services Committee, Section 913 of the Dodd-Frank Act directs the SEC to conduct a study to evaluate the effectiveness of current standards, both at the state and federal levels, with respect to investment advisers and broker-dealers when providing personalized investment advice and recommendations about securities to retail customers. Before the SEC proceeds with any new regulations in this area, said Rep. Bachus, it is critically important that the unique roles of different financial professionals, their distinct relationships with their customers, and the nature of the services and disclosures they provide be fully examined and well understood. These definitive factors should provide information to guide the SEC in determining if any new regulations are needed and defining the details of any such measures that might be proposed. The House-Senate conferees included the requirement for a comprehensive study for these purposes, said Rep. Bachus, and it is the intent of Congress that the SEC follow with a thorough and objective analysis in this regard. Cong. Record, June 30, 2010, p. H5255.

Rep. Paul Kanjorski, Chair of the Capital Markets Subcommittee, emphasized that a chief reform in the area of investor protection is that the Dodd-Frank Act provides that the SEC, after it conducts a study, may issue new rules establishing that every financial intermediary who provides personalized investment advice to retail customers will have a fiduciary duty to the investor. According to Rep. Kanjorski, a traditional fiduciary duty includes an affirmative duty of care, loyalty and honesty; an affirmative duty to act in good faith; and a duty to act in the best interests of the client. Through this harmonized standard of care, both broker and investment advisers will place customers? interests first. Rep. Kanjorski noted that regulators, practitioners, and investor advocates have become increasingly concerned that investors are confused by the legal distinction between broker-dealers and investment advisers. The two professions currently owe investors different standards of care, even though their services and marketing have become increasingly indistinguishable to retail investors. The issuance of new rules will fix this long-standing problem, in his view. Cong. Record, June 30, 2010, p. H5237.

Full post as published by Jim Hamilton's World of Securities Regulation on July 05, 2010 (boomark / email).