SEC’s Schapiro: One fiduciary standard needed for all securities professionals

Securities and Exchange Commission Chairman Mary Schapiro today called for subjecting all securities professionals to the same standards of conduct and licensing requirements.
Speaking to the Consumer Federation of America’s annual financial services conference in Washington, Ms. Schapiro said that all securities professionals should be subject to the same fiduciary duty so investors receive advice that is in their best interests.
“The fiduciary duty needs to be meaningful and uniform across all securities professionals,” she said. “It cannot be weakened or diluted just so that it can be applied broadly.”
But to fully protect the interests of investors, “we must couple the fiduciary duty with an effective oversight regime,” she said. “Securities professionals, regardless of what their business card says, should be subject to the same standard of conduct, the same licensing and qualification requirements, the same disclosure obligations, the same regulatory and record-keeping standards, and a robust examination and oversight schedule.”
Ms. Schapiro, former CEO of the Financial Industry Regulatory Authority Inc., conceded that such an approach may disrupt a number of entrenched interests.
“But we are doing no service to retail investors by continuing with a distinctly different regulatory approach for professionals who perform virtually the same or similar services,” she said.
After her speech, Ms. Schapiro was asked if there should be any distinction between investment advisers and broker-dealers. “If they’re providing the same service, there shouldn’t be much of a distinction,” she said. If they do different things, such as executing a trade at a broker-dealer, “then there’s room to talk,” she said. “But the idea is that it shouldn’t fall upon the investor to have to figure out what protections they’re entitled to under two different statutory regimes.”
The idea is “a concept” at this point, she noted, without providing further details.
Asked if one agency should oversee all financial advisers — whether brokers or investment advisers — she noted that currently the states and the SEC oversee investment advisers while brokers are regulated separately. “The issue is that the regulatory regime and standard of care need to be comparable.”
The same fiduciary duty should apply to all, she said, as well as the same regulatory requirements. The SEC boss pointed out that investors are not able to understand the difference between the standard of care and regulations governing brokers and investment advisers. “There should also be the same quality of regulatory requirements.”
Such an approach would include licensing for both broker-dealers and investment advisers.
“I don’t think we solve the problem if we give everybody the same standard of care but we still have very disparate quality of regulation of those two entities,” she said.

Related Topics: Securities and Exchange Commission