Corporate & Securities Law

By Jim Hamilton

NASAA Reiterates Call for Strong Fiduciary Standard

In a comment letter written on January 7 to members of the Senate Banking Committee, the North American Securities Administrators Association (NASAA) joined with six other organizations in supporting a provision in the Restoring American Financial Stability Act of 2009 that would require broker-dealers who offer investment advice to be held to the fiduciary standard set forth under the Investment Advisers Act of 1940. NASAA stated in a news release today that it had joined the Consumer Federation of America, Fund Democracy, the Investment Adviser Association, the Certified Financial Planner Board of Standards, the Financial Planning Association, and the National Association of Personal Financial Advisors in calling for the adoption of a "strong, pro-investor fiduciary duty." The organizations also voiced their opposition to efforts by the securities industry to weaken the bill's consumer protection provisions through the promotion of a new "federal" fiduciary duty standard.

The organizations stated in their comment letter that Section 913 of the Senate reform bill benefits investors by imposing a fiduciary duty on all providers of investment advice ?in a straightforward and sensible fashion" by removing the broker-dealer exclusion from the Investment Advisers Act. Noting that the exclusion allows brokers to avoid registering as advisers if the advice they provide to clients is ?solely incidental? to selling securities, the organizations said that the misapplication of the provision by the U.S. Securities and Exchange Commission has allowed brokers to escape appropriate regulation as fiduciaries even while they adopt an increasingly advice-based business model. In the organizations' view, the draft bill ?eliminates the legislative loophole that has allowed this dual standard to persist.? The joint letter was accompanied by a "myths-facts sheet" that seeks to rebut arguments and misinformation about the bill?s fiduciary requirement.

Full post as published by Jim Hamilton's World of Securities Regulation on January 11, 2010 (boomark / email).