NASAA Urges Senate Banking Committee to Stand Up for Investors by Retaining the Fiduciary Provisions of the Restoring American Financial Stability Act of 2009

WASHINGTON, D.C. (February 25, 2010) –The North American Securities Administrators Association (NASAA) today urged the Senate Banking Committee not to eliminate one of the most important investor protection provisions from its revised regulatory reform package in favor of an industry-supported study.

The committee continues working on its revisions of the proposed “Restoring American Financial Stability Act of 2009,” which includes a provision that would require stock brokers who provide investment advice to adhere to the high fiduciary duty standards of the Investment Advisers Act. Currently, the act only applies to investment advisers, who are legally required to act in their customers’ best interests.

“We understand that the fiduciary provision of Sec. 913 is in danger of being replaced with a call for a study of investment adviser regulation. Investors and more particularly senior investors don’t need another study. They need help now,” said NASAA President and Texas Securities Commissioner Denise Voigt Crawford.

“Inserting a study proposal in a 1000-page bill rather than as a free-standing amendment effectively silences the important and necessary debate in the Senate over the proper legal obligation brokers should have to investors when offering investment advice. Main Street investors deserve an open dialogue and vote on the merits of the strong fiduciary duty provision,” Crawford said.

While little public attention has focused on Sec. 913, it has attracted considerable notice from members of the brokerage and insurance industries and has been the center of a well-funded lobbying effort to strip it from the Senate’s final financial regulatory overhaul package. The fiduciary duty and disclosure obligations contained in Section 913 would go a long way in protecting investors by requiring brokers who provide investment advice to put their customers’ interests ahead of their own.

“It is surprising that in its attempts to promote investor confidence and change the ‘business as usual’ approach favored by industry, the committee would even consider removing the most important, investor-protection provision from its regulatory reform package,” Crawford said. “State securities regulators urge the Senate Banking Committee to stand up for Main Street, not Wall Street, and fight to preserve the strong fiduciary duty language of Sec. 913.”

“For too long, brokers have been free to market themselves as trusted advisers and offer extensive advisory services without having to live up to the investment adviser fiduciary duty standard appropriate to that role,” Crawford said. “As a result, many investors do not know the difference between the responsibilities of an investment adviser and a broker. Section 913 provides a logical, straightforward approach to addressing that problem, by eliminating the legislative loophole that has allowed that dual standard to persist.”

For more information:
Bob Webster, Director of Communications

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