(Bloomberg) — SEC Chair
White called for a new regulation that would make brokers put the interests of their clients ahead of their own, a so-called fiduciary duty. The remarks came after the Obama administration advanced a plan through the
White’s plan would make all financial advisors follow the same rules.
The financial industry has been watching closely for White to reveal her position, which would break a standoff between the two Democrat and two Republican commissioners. White said she will begin talking with other commissioners about the outlines of new rules.
Under current regulations, brokers must make “suitable” recommendations, meaning the investments have to fit the customer’s needs and tolerance for risk. That’s looser than the fiduciary standard that investment advisors face. Some investor groups say the current rules don’t go far enough to limit conflicts of interests for brokers, who are paid by mutual funds and other companies for selling their products.
White called for
White’s support for the measures aligns her with the Obama administration and congressional Democrats. It pits her against many Republicans, who have said a fiduciary standard will be costly for brokers and could make them drop less wealthy clients.
“Getting the balance right is absolutely essential,” White said. “At the end of the day, if all we succeed in doing is depriving investors of reliable, reasonably-priced advice, we will have failed in that effort.”
White also said today she supports third-party compliance exams of investment advisors, an idea supported by some Republicans. The
The outside exams would supplement, not replace, the SEC’s own compliance efforts, she said.
“The SEC really has for years not had sufficient resources to examine investment advisors,” she said. “Having a strong fiduciary duty standard on the books is only strong if it’s complied with and it’s enforced.”
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