Fiduciary (Investment Accounts)

Fiduciary (Investment Accounts)

SEC Supports Fiduciary Rule for Brokers

On March 17, 2015, SEC Chairwoman Mary Jo White broke her silence on this issue and announced that the agency should “implement a uniform fiduciary duty for broker-dealers and investment advisers where the standard is to act in the best interest of the investor.” Chair White went further to say that any change should be consistent with the requirements of the Dodd-Frank Act, and cautioned that any proposed rule should not adversely impact middle-market investors. NAIFA agrees with the concern for middle-market investors expressed by Chair White, and has been raising similar concerns about the possible impact of a uniform fiduciary duty since the enactment of the Dodd-Frank Act. NAIFA’s position is that if the SEC moves forward with proposing a new uniform standard of care for broker-dealers and investment advisers, then certain conditions and requirements must be in place to ensure middle and lower-income consumers have access to competent professional services and financial products.


Section 913 of the Dodd Frank Wall Street Reform and Consumer Protection Act directed the SEC to conduct a study analyzing the standards of care applicable to persons who provide personalized investment advice. Section 913 also provided that after the completion of the SEC study, the agency would be authorized, but not required, to adopt a rule imposing a uniform standard of care upon investment advisers and broker-dealers.  The SEC staff’s study was completed and released in January, 2011, and recommended that the SEC move forward with the creation of a common fiduciary standard of care for broker-dealers and investment advisers.

Since the release of the SEC study in 2011, the Commission has moved cautiously on this issue, and has not yet issued a proposed rule; there are several reasons why action on this issue is still pending. First, as mentioned above, following the release of the SEC study NAIFA was quick to raise concerns that imposing new regulatory standards on broker-dealers and their registered representatives could result in middle market investors, who may not be able to afford the fees charged by the typical investment adviser, losing access to a broad range of products as well as professional advice and service.

Similar concerns were also raised by two SEC commissioners and numerous members of Congress. Over 3,000 comment letters—including a lengthy letter from NAIFA and over 1,000 letters from NAIFA members– were submitted to the SEC on this issue, and the inability to reach a consensus among the commissioners on whether or how to proceed ruled out quick action by the SEC. Along with several recent court cases which ordered the SEC to thoroughly analyze the impact of its proposed rules on competition and the marketplace, these concerns have resulted in the SEC taking a more deliberate, comprehensive approach to determining the impact a possible fiduciary rule would have on investors.

The SEC has not issued a timetable for how or when it will move forward on this issue, but all indications are that the SEC will continue its cautious approach.

NAIFA Comment Letters
2013 Comment Letter
2010 Comment Letter

NAIFA Position
NAIFA Policy Statement on Standard of Care (4/15)