William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

New Dodd-Frank Study Calls for Stringent Standards

Posted by William Byrnes on February 21, 2011

The Securities and Exchange Commission (SEC) submitted to Congress a staff study recommending a uniform fiduciary standard of conduct for broker-dealers and investment advisers — no less stringent than currently applied to investment advisers under the Investment Advisers Act of 1940– when those financial professionals provide personalized investment advice about securities to retail investors.

Section 913 of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required SEC to conduct a study to evaluate:

  • The effectiveness of existing legal or regulatory standards of care (imposed by current authorities) for providing personalized investment advice and recommendations about securities to retail customers; and
  • Whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to the standards of care for providing personalized investment advice about securities to such customers that should be addressed by rule or statute.

In the study, the SEC notes that investment advisers and broker-dealers are regulated extensively under different regulatory regimes.  But, the study claims, many retail investors do not understand and are confused by the roles played by investment advisers and broker-dealers.  The study finds that “many investors are also confused by the standards of care that apply to investment advisers and broker-dealers” when providing personalized investment advice about securities.  Read the analysis at http://www.advisorfyi.com/2011/01/new-dodd-frank-study-calls-for-stringent-standards/


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