On Jan. 22, 2011, the SEC officially released its long-awaited study on the appropriate standard of care for investment advisers and broker-dealers. Key tenets to the study:
The regulatory regime that governs the provision of investment advice to retail investors is essential to assuring the integrity of that advice and to matching legal obligations with the expectations and needs of investors. [pg i]
Investors have a reasonable expectation that the advice that they are receiving is in their best interest. They should not have to parse through legal distinctions [emphasis added by Ethos] to determine whether the advice they receive was provided in accordance with their expectations. [pg 115]
The SEC has concluded that both advisers and brokers should be held to a "uniform fiduciary standard of care:"
Specifically, the Staff recommends that the uniform fiduciary standard of conduct established by the Commission should provide that:
the standard of conduct for all brokers, dealers, and investment advisers, when providing personalized investment advice about securities to retail customers (and such other customers as the Commission may by rule provide), shall be to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser providing the advice. [pg vi]
The SEC's next step (scheduled to take place over the next six months) is to engage in rule-making to implement the uniform fiduciary standard of care, and to "harmonize" the adviser and broker regulations associated with the uniform standard.
It's important to note how the SEC uses certain terminology; the term "universal" is associated with the standard of care; and the term "harmonized" is associated with the regulations.
