Adviser groups to SEC’s Investor Advisory Committee: Don’t impose a definition on concept of ‘fiduciary duty’

Four groups that represent investment and financial advisers complained in a letter about the possibility that the Securities and Exchange Commission's Investor Advisory Committee may attempt to define the term “fiduciary duty.”

Four groups that represent investment and financial advisers complained in a letter about the possibility that the Securities and Exchange Commission’s Investor Advisory Committee may attempt to define the term “fiduciary duty.”

“Instead of trying to define fiduciary duty, we urge the committee instead to consider a recommendation to clearly and unambiguously extend the fiduciary duty that investment advisors owe their clients under the Investment Advisers Act to brokers who provide investment advice,” noted the Aug. 6 letter from the Financial Planning Association of Denver, The National Association of Personal Financial Advisors of Arlington Heights, Ill., the Investment Adviser Association and the Certified Financial Planner Board of Standards Inc., both of Washington.

The groups raised the issue in response to a July 29 press release from the committee that could be read to suggest that the fiduciary duty must be meet an accepted “definition” in order to provide a workable standard.

The concept of a fiduciary duty has been a matter of common law for hundreds of years, and it has never had a precise definition, the groups said in the letter that was addressed to the Investor Advisory Committee’s co-chairmen, Richard Hisey, president of AARP Financial Inc. of Tewksbury, Mass., and Hye-Won Choi, senior vice president and head of corporate governance for TIAA-CREF of New York. “It would be no more appropriate to insist on a precise definition of fiduciary duty than it would be to insist on a precise definition of the duty not to commit fraud,” noted the letter.

It was signed by Kevin Keller, chief executive of the CFP Board, Marvin Tuttle, executive director and chief executive of the FPA, David Tittsworth, executive director of the IAA, and Ellen Turf, chief executive of NAPFA.

“The specifics of any further definition of fiduciary duty should be left to the expert policymakers at the SEC,” Travis Larson, a spokesman for the Securities Industry and Financial Markets Association of New York and Washington, wrote in an e-mail “But the baseline definition should absolutely be when individual investment advice is provided, the clients’ interests are put first.”

SIFMA has called for a new federal fiduciary standard, an approach investment advisory groups reject because they fear the new version would be weakened.