Comment on the SEC Study on Fiduciary Issue

I have mentioned that the financial reform bill that was signed into law last month includes language authorizing the U.S. Securities and Exchange Commission to conduct a study of the current standards of care that exist in the financial services industry for the delivery of financial and investment advice. Further, once the study has been concluded, the SEC has been authorized to impose a new standard.

If you wish to comment on this very important matter, you may visit the SEC at this location:

The National Association of Personal Financial Advisors, of which I am a member, has offered the following guidance:

(1) The bona fide fiduciary standard of conduct should apply to all those who provide investment advice to retail investors, without exception;

(2) No "hat switching" should be permitted - i.e., once a person is in a relationship of trust and confidence with his or her client, the fiduciary obligations of the advisor extend to the entire relationship. A client's trust would be subsumed by any attempt of the advisor to switch to a non-fiduciary (arms-length) product sales relationship.

(3) No denigration of the fiduciary standard of conduct currently existing under the Investment Advisers Act of 1940 should occur through the adoption of "particular exceptions" - the SEC should maintain the fiduciary standard of conduct as the "highest standard under the law."

(4) Restoring the trust of individual Americans in our financial system begins with individual Americans trusting in the individual advisor across the table from them. All the other reforms seen recently will fail to protect Americans if, at the final point of advice provided to individual Americans, the advisor fails to adopt the client's interest as his or her own.

(5) Americans need and desire truly objective, expert advice. The provision of such advice, in today's complex financial world, is essential for the future retirement security of hundreds of millions of Americans. Moreover, should Americans fail to receive objective advice, this will result in less capital formation, less private savings, and increased strain on federal and state government resources - precisely when governments are strained with their own fiscal difficulties.

I encourage you to make your voice heard on this issue.