Consumer advocates, financial regulators and industry organizations are calling on lawmakers such as Sen. Bob Corker of Tennessee to put in a financial reform bill a provision that requires financial planning brokers to act in the best interest of customers.
“The House bill represents a clear and sensible compromise that imposes a fiduciary duty on brokers but does so in a way that accommodates industry concerns,” said Barbara Roper, director of Investor Protection for the Consumer Federation of America.
In contrast, she said, the Senate bill requires the Securities and Exchange Commission to study the issue, then denies it the authority it would need to solve the problem.
“At best (the Senate bill), it would delay reform for years; at worst it would kill it completely,” she said. “In the meantime, vulnerable investors will continue to be victimized by brokers masquerading as advisers, and billions of dollars that could have gone toward retirement savings, college savings, or the purchase of a new home will go instead to line the pockets of these deceptive brokers.”
Sen. Corker, a Republican and one of the committee members, could not be reached for comment Tuesday because he was meeting about the issue, according to his spokeswoman, Laura Herzog.
The conference committee this week has taken up the task of resolving differences between the House and Senate financial regulatory reform bills.
In a Tuesday letter to the House and Senate conferees, Ms. Roper and five other leaders of financial groups urged the adoption of a provision in the House-passed bill that would extend the fiduciary standard of care to all financial professionals who give investment advice.
The standard already is a requirement for investment advisers. But under current law, broker-dealers are free to call themselves financial advisers and offer investment services that benefit them more than the customers.
“Requiring all financial professionals to act in the best interests of their customers when they provide investment advice is the single most important protection needed by the average Main Street investors,” the letter states.