The White Law Group continues to follow the SEC discussions regarding the development of a unified fiduciary standard in accordance with Dodd-Frank Wall Street Reform and the Consumer Protection Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that the SEC conduct a review of SEC operations, structure and relationship with Self-Regulator Organizations, such as FINRA. The Act, which was signed into law in 2010, also proposed a uniform fiduciary standard be established for anyone giving investment advice. For more information on the Dodd-Frank Wall Street Reform and Consumer Protection Act see our earlier post here.
Harvard Law professor Robert H. Sitkoff recently published an interesting paper (here) discussing how agency fiduciary law may be applied to financial advisors. Sitkoff points out, “The core fiduciary duties are loyalty and care.” This paper explores in detail how the fiduciary relationship is often established in the investors / investment advisor context.
Although brokerage firms often attempt to argue that their advisors do not have a fiduciary duty to clients, according to On Wall Street, “the SEC holds advisors to a fiduciary standard that requires them to act in the best interest of their retail clients when making recommendations about investment strategies. Broker-dealers, by contrast, are required to adhere to a less explicit suitability requirement that stipulates that they recommend appropriate investments for their clients, but not necessarily that they put their clients’ interests ahead of their own.”
The SEC released the Third Report on the Implementation of SEC Organization Reform Recommendations, (here) in October 2012, and according to the 2012 Agency Financial Report the SEC plans to “move forward” regarding recommendations for a uniform fiduciary standard for brokers and financial advisors. Given the monumental shift such a standard would create, it is not surprising that brokerage firms are fighting the move and drying to dilute the language.
If you are an investor and are unclear as to what duty your broker has to you, this is certainly something worth following.
The foregoing information was provided by The White Law Group. The White Law Group is a national securities fraud, FINRA arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com. For a free consultation with a securities fraud attorney, please call the firm’s Chicago office at 312/238-9650.Tags: broker-dealer fiduciary duty, brokerage firm duty of loyalty and care, brokerage firm fiduciary duty, customer-specific suitability, Dodd-Frank fiduciary duty, fiduciary law, financial advisor due diligence requirement, financial advisor fiduciary duty, FINRA arbitration attorney, FINRA arbitration lawyer, FINRA know your customer rule, FINRA Regulatory Notice 10-22, FINRA Regulatory Notice 11-02, investment advisor fiduciary duty, investment fraud attorney, investment fraud lawyer, Know Your Customer Rule 2090, New Liability Exposure for Intermediaries in Private Placements, NTM 10-22, NTM 11-02, NYSE Rule 405(1), quantitative suitability, reasonable basis suitability, Section 913 of Title IX of Dodd-Frank, securities fraud attorney, securities fraud lawyer, Standard of Care for Broker-Dealers, Standard of Care for Financial Advisors, Standard of Care for Investment Advisors, stockbroker due diligence requirement, stockbroker fiduciary duty, Suitability Rule 2111, uniform fiduciary standard