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SIFMA Chairman Taft Testifies Before House Financial Services Subcommittee On Uniform Fiduciary Duty, Oversight Of Broker-Dealers And Investment Advisers

Date 13/09/2011

John Taft, CEO of RBC Wealth Management, US and Chair of SIFMA today testified before the House Financial Services Committee’s Subcommittee on Capital Markets and Government Sponsored Enterprises on the Securities and Exchange Commission’s (SEC) current efforts to begin rulemaking on creating a uniform fiduciary standard of care for broker-dealers and investment advisers and also possible legislation to bring investment advisers under greater federal regulation.

“We believe strongly that Congress explicitly intended for the SEC to craft a uniform fiduciary standard that not only protects investors, but also preserves investor choice and access to cost-effective financial products and services and is adaptable to the substantially different operating models of broker-dealers and investment advisers,” said Taft in testimony.

In testimony, Taft reiterated SIFMA’s support for the establishment of a uniform fiduciary standard of care for brokers and investment advisers who provide personalized investment advice to retail customers.  Taft noted that SIFMA believes investor’s best interest should be put first and their ability to choose the products and services they want must be preserved.  He also noted that the SEC should follow the intent of the legislation and not simply copy the current fiduciary standard for investment advisers and impose it on brokers.

Taft also noted that getting this rulemaking done right is vitally important for the millions of investors currently served by both investment advisers and broker dealers.  He noted that as SIFMA and Oliver Wyman’s own study shows, a poorly written rule could result in added costs to investors.  For an investor with $200 thousand in assets, a poorly written rule results in an additional $460 in service costs. Taft urged the SEC to employ proper cost benefit analysis to avoid unintended consequences that could harm investors, and that proper cost-benefit analysis will help ensure any final rule follows the intent of the legislation.

Taft continued by noting that the SEC must also consider its rulemaking in the full context of other conflicting regulatory initiatives such as the Department of Labor’s ERISA fiduciary proposal.  SIFMA has been on record voicing its believe that the DOL proposal is fatally flawed and cannot continue to operate on a separate track.  It should be withdrawn and re-proposed in coordination with the SEC.

Taft also noted that the SEC must ensure there is a comparable examination and enforcement structure for all investment advisers and broker dealers that are held to the new fiduciary standard.  Taft reiterated SIFMA’s support for the establishment of a self-regulatory organization that will oversee investment advisers in a comparable manner to the current regulatory oversight of brokers.

The full testimony can be found at the following link: