“Wall Street reform will not regain the trust of Main Street unless Congress embraces extending fiduciary duty to all financial professionals who provide advice to investors,” Crawford said Tuesday. She also applauded House Capitol Markets Subcommittee chairman, Paul Kanjorski, for recognizing the need for the final package to have the “strongest possible fiduciary duty for every financial intermediary providing personalized advice.”
Crawford said state securities regulators are urging conference committee members to support the House approach to this issue, instead of the plan to study the issue which is proposed by the Senate.
“This is not a new standard but rather one that has been in place for more than 50 years and applicable to investment advisers,” Crawford said. “This provision will align the legal obligations of broker-dealers with the expectations of their clients. It will address abusive sales practices such as incentive programs that encourage brokers to push more costly and poorer performing products over others. In short, it will ensure that brokers and agents put their clients’ interests ahead of their own.”
Crawford added that, “Self-interested members of industry and their trade associations who are looking to protect their bottom line will continue to fight against the fiduciary duty standard because it will force them to disclose conflicts they’d rather keep hidden. In order to earn the confidence of American investors, these practices must end.”
In addition, she identified several other investor protection provisions favoured by state securities regulators, including: increasing state oversight authority of investment advisers; adding state securities, banking and insurance regulators to the Financial Stability Oversight Council; and ending mandatory securities arbitration.
“The negotiations taking place over the next two weeks by members of the House-Senate conference committee on financial reform have the opportunity to change the way Wall Street and Main Street intersect to provide stronger protections not only for today’s investors but for a generation of investors to come. That’s why it is so important that Congress gets this right,” she said.
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