Finance

Who Needs The SEC Anyway

At least one New York City official would answer that question in the negative. The city comptroller released a proposal that would require a financial advisor to clearly state whether he or she must act in the investor’s best interests.

By Joshua Horn  
on

Ed note: This post originally appeared on Securities Compliance Sentinel.

At least one New York City official would answer that question in the negative. The city comptroller released a proposal that would require a financial advisor to clearly state whether he or she must act in the investor’s best interests.

In other words, do what the SEC has yet to do through a uniform fiduciary duty for all advisors who provide retail investment advice. Under the city comptroller’s proposal, an advisor would have to provide the following disclosure at the beginning of the relationship and frequently thereafter:

“I am not a fiduciary. Therefore, I am not required to act in your best interests, and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks and expected return for you.”

A concern raised by this proposal is that it is not neutral, but instead unfairly focuses on broker dealers. That concern could be addressed by adding to the statement a message about the suitability standard that broker dealers must follow.

Although it is unclear whether this proposal will ever make it to the legislature, it shows a growing impatience with the SEC’s failure to adopt a uniform fiduciary duty standard. Maybe this proposal will send a message that the SEC has to finally take action on the long promised uniform standard.

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