NASAA Statement on New Survey Showing Near Unanimous Investor Support for Fiduciary Duty Standard of Care

WASHINGTON (September 15, 2010) – The following is a statement from North American Securities Administrators Association (NASAA) President and Texas Securities Commissioner Denise Voigt Crawford on today’s release of a survey showing that investors nearly unanimously believe that when they receive investment advice from a financial professional, the person providing the advice should put investor interests ahead of their own. The survey was conducted by ORC/Infogroup for the Consumer Federation of America, AARP, NASAA, and leading investment adviser and financial planning organizations, including the Certified Financial Planner Board of Standards, Inc., the Investment Adviser Association, the Financial Planning Association and the National Association of Personal Financial Advisors. Complete survey results are available here.

“When the SEC launched its comment period regarding the obligations of broker-dealers and investment advisers, Chairman Schapiro said regulations work best when stakeholders are engaged and investors are offering ideas and alternatives.

“As the comment period drew to a close, more than 2,500 responses had been sent to the agency. Many of these comments, however, were the result of industry-funded campaigns designed to jam the SEC’s in-boxes and drown out the voices of investors with the same tired rhetoric that was used to influence Congress during the debate on extending the fiduciary duty standard of care to brokers and insurance agents in the Dodd-Frank Act.

“Most of the investors who come to my office and the offices of my colleagues around the country with complaints about brokers or advisers are not the type to fire off letters to the SEC. They’re busy raising families and trying to make ends meet. But when it comes to this issue, they know what they want and what they deserve.

“When asked, they almost unanimously will tell you that they expect a fair deal when they get advice about their investments. If you ask them what they consider fair, their answer is straightforward – they expect their interests to come first when they receive advice about what to do with their money. Plain and simple. No matter who provides the advice.

“Today’s survey results provide confirmation and are consistent with what my colleagues in state securities agencies throughout the United States have heard for many years now.

“The Dodd-Frank Act gives the SEC unprecedented rulemaking opportunities to achieve both the Commission’s and NASAA’s overarching goal — “putting investors first.”

“Because we see the devastating effects of what happens when the interests of investors are pushed into the background, state securities regulators have consistently urged policymakers to give investors what they have long deserved. And that is to require all who provide investment advice to be held to the fiduciary duty currently applicable to investment advisers as established by the Investment Advisers Act of 1940.

“Unlike investment advisers, broker-dealers are not required to put investor interests ahead of their own. This means brokers are not required to disclose to investors critical features of the investments they sell, including costs, commissions and conflicts of interest associated with these investments, which results in a significant regulatory and investor protection gap.

“The SEC has the opportunity to close this gap and fulfill Congressional intent by extending the fiduciary duty standard of care under the Investment Advisers Act of 1940 to all financial professionals who provide personalized investment advice to their retail clients.

“The SEC has the authority to do so, once it completes its ongoing study of the obligations of brokers and investment advisers. The Rand Corporation’s exhaustive 2008 study for the SEC made clear that the investing public is confused about the distinctions between broker-dealers and investment advisers, and mistakenly believes that brokers already act as fiduciaries. The same story has been repeated by investor and consumer advocates in congressional hearings over the past two years. Today’s survey results confirm those findings.

“We encourage the SEC to listen to the voice of investors as expressed in this survey and do the right thing. Apply the fiduciary duty of the Investment Advisers Act to those who provide investment advice about securities.”

For more information:
Bob Webster, NASAA Director of Communications
202-737-0900

2010 Headlines, Newsroom