|Frances McMorris,Lorie Konish|
Despite SIFMA’s public statements that it supports a uniform fiduciary rule for all advisors, the
In a strongly worded letter to the
“SIFMA’s views are not supportable and would make a mockery of the fiduciary standard,” the Institute stated in its
SIFMA wants “want to use the word fiduciary but when you look at the essence of it, it comes up short,” Rostad said in a telephone interview. During the last two weeks, members of the Institute have had four meetings with
Under a fiduciary standard, an advisor is required to put the best interests of the clients first and provide disinterested advice. Under a suitability standard, which many brokers now adhere to, an advisor must recommend products that are suitable for a particular client.
Meanwhile at SIFMA’s most recent
But Rostad and the Institute argue that SIFMA’s view of a fiduciary standard is different from the one that regulators and investor groups support and that stems from the Dodd-Frank Act and the Investment Advisers Act of 1940 that govern investment advisers.
In fact, in SIFMA’s
In SIFMA’s letter from nearly a year ago, it also stated: “it would not be in the best interest of retail customers, because it would negatively impact choice, product access and affordability of customer services. It would also be problematic for broker-dealers from a commercial, legal, compliance, and supervisory perspective.”
However, the Institute in its recent letter stated: “The Dodd-Frank Act provides that the sale of proprietary or other limited range of products, ‘shall not, in and of itself, be considered a violation of such standard.’ The language merely means that proprietary or a limited-range of products, as a class; do not per-se breach the fiduciary standard. This language does not, however, support the notion that moving to a fiduciary standard should have no impact whatsoever on the sale of proprietary products, on the sale of a limited range of products, or the sale of any product that involves a conflict of interest.”
The Institute added that SIFMA’s position “appears to reflect a position that suitable product recommendations suffice, and that a fiduciary ‘due care’ screening and investment selection process to meet the ‘best interest’ standard is not required.”
The Institute, in its letter, also criticized SIFMA’s position when it comes to conflicts of interests, saying that the trade group prefers that brokers only disclose conflicts rather than avoid them altogether. “At its core, SIFMA, it appears, unabashedly champions the benefits of conflicted advice. SIFMA’s stance on conflicts is hard to reconcile with investors’ best interests. . .While there is no question that advisors are permitted to choose to either eliminate or to disclose conflicts, there is also no ambiguity which option the
In the telephone interview with
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