Wall Street bigs asked to sign off on fiduciary duty

An industry group that has been pushing for a uniform fiduciary duty for advisers isn’t giving up hope.
As expected, the idea of imposing such a duty on all financial advisers has been pretty much dropped from the financial-reform bill unveiled today by Senate Banking Committee Chairman Christopher Dodd (D-Conn.). He wants regulators to study some more on the issue.
Nevertheless, The Committee for the Fiduciary Standard called on executives of major securities firms and banks to sign off on a pledge to follow the fiduciary standards established under the Investment Advisers Act of 1940.
The committee sent a letter today to Brian Moynihan, chief executive of Bank of America Corp., and Sallie Krawcheck, president of the bank’s global wealth and investment management unit. He sent similar letters to Jamie Dimon, chief executive of JPMorgan Chase & Co., John Mack, chief executive of Morgan Stanley, and Lloyd Blankfein, chief executive at The Goldman Sachs Group Inc.
“We’ll have to see” if any of the executives sign off, said Knut Rostad, chairman of the fiduciary-standard committee, and the regulatory and compliance officer at Rembert Pendleton Jackson, and advisory firm with about $600 million under management.
In an interview with InvestmentNews, Mr. Rostad said two of the firms have asked for follow-up information, but he declined to identify the firms.
“Morgan Stanley is aligned with the industry position outlined by [the Securities Industry and Financial Markets Association],” Morgan Stanley spokesman Jim Wiggins said in a statement.
SIFMA supports a “new federal securities standard of fiduciary care that would apply uniformly to broker-dealers and investment advisors who provide personalized investment advice,” Mr. Wiggins said.
He added that most Morgan Stanley Smith Barney LLC brokers are dually registered and subject to a fiduciary standard with their clients’ advisory accounts.
Mr. Dodd’s bill directs the SEC to study the “standards of care” required for retail customers under adviser versus broker regulations, and analyze regulatory gaps and resources directed into each area.
The bill also calls for the Comptroller General to study the issue of imposing a “uniform fiduciary duty on financial intermediaries who provide similar investment advisory service.”
In an e-mail, Melissa Daly, a Goldman Sachs spokeswoman, referred InvestmentNews to a January statement by Mr. Blankfein to the Financial Crisis Inquiry Commission.
“We do support the extension of a fiduciary standard to broker-dealer registered representatives who provide advice to retail investors,” Mr. Blankfein told the committee. “The advice-giving functions of brokers who work with investors have become similar to that of investment advisers.”
Ms. Daly was not immediately available for further comment. Spokespersons for BofA and JPMorgan were not immediately available.
Mr. Rostad called the Dodd bill a “bump in road” toward achieving widespread fiduciary duty.
“When you have the chairman of the SEC, the chief executive of [the Financial Industry Regulatory Authority Inc.], the CEO of Goldman Sachs and [the head of] SIFMA calling for some variation of a fiduciary standard, it suggests there’s movement … that’s not going to stop,” he said.
On a call with reporters today, Mr. Rostad said a fiduciary requirement could still be added as financial reform moves through Congress.