Will fiduciary responsibility be weakened?

By Felix Salmon
June 29, 2010

One of the best pieces of news to come out of the financial regulatory reform bill (assuming it goes through) is that stockbrokers will finally have a fiduciary duty to their clients. It’s long overdue — but already, before the bill is even passed, brokers are trying to find ways to weaken it. Joe Giannone spoke to brokerage executive John Taft:

Taft contends that when the SEC gets to work on drafting the actual rules of the road — and Taft says there is no question a fiduciary standard is coming — it ought to take into account the different ways clients work with brokers.

“You’ve got to change” the standard, Taft said. “It’s got to be different.”

Er, no, you don’t have to change the standard at all — especially since by “change”, Taft clearly means “weaken”.

I suspect that one of the key problems here is that brokers are desperate to be able to privilege their own shop’s products over their competitors’. But if they have a fiduciary duty to their clients, and a competitor is offering an identical-yet-cheaper product, then they might well have to steer their clients to their competitors. I don’t have a problem with that. But enforcing it is going to be a nightmare — assuming that the rule even survives in its present form, and the SEC doesn’t chip away at it before it’s implemented.


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The bill calls for the SEC to study fiduciary standards and subsequently promulgate and implement rules based on the results of that study. There is no “present form.”

Posted by RLehmann | Report as abusive

Who in his or her right mind would ever seek to weaken fiduciary standards?

Oh, bankers, thrifts and trusts, ye of little faith…

Posted by HBC | Report as abusive

I wonder when they will force investment advisors to have a proper fiduciary responsibility to their investors? After all most of people’s money is siphoned up through these vehicles rather than a bank selling the product directly. Or we could have the insane idea that people should be responsible for their own money… but that would be far far far too radical.

Posted by Danny_Black | Report as abusive