To Break Fiduciary Deadlock, Groups Lay Out Path for SEC

The groups went on to say that brokers' concerns are "clearly unfounded" that imposition of a fiduciary duty on their "personalized investment advice could have catastrophic consequences—forcing brokers to abandon commission-based compensation, proprietary sales, or transaction-based recommendations."

While the SEC must be "mindful of the impact upon the industry as it implements the fiduciary standard for brokers, it must also avoid an over response to expressions of broker-dealer concerns that reflect either a misunderstanding of the standard or an unwarranted effort to limit its scope," the groups wrote. "The result of accommodating such unfounded concerns would undermine entirely the Congressional initiative to provide necessary investor protections. As long as the Commission stays true to the vision outlined in the Section 913 Study, however, it can implement the standard in a way that retains aspects of the broker-dealer business model investors value while fulfilling the Congressional mandate to improve protections for investors."

Barbara Roper, director of investor protection for the CFA, said in releasing the framework that "As markets become increasingly tumultuous and financial products become increasingly complex, investors desperately need advice they can rely on to help them achieve their investment goals. The most important thing the SEC can do to support that outcome is to move forward on a rule requiring brokers to act in their customers' best interests when providing personalized investment advice and recommendations."

The framework, she said, "is intended to help the SEC identify a way forward on rulemaking that can win broad investor and industry support, improve investor protections, and preserve investor choice."

David Tittsworth, executive director of the Investment Adviser Association, added that "The Advisers Act fiduciary duty serves as a bedrock principle of investor protection, and the IAA has long supported its application to those who provide personalized investment advice about securities to retail clients. The duty is well-established and has been consistently interpreted by the courts and SEC for decades.  It is incumbent upon the SEC to not weaken it or otherwise dilute its investor protection benefits."