In January 2011, the Government Accountability Office (GAO) released a report concerning regulation of financial planners. The report, which was mandated by the Dodd-Frank reform legislation, makes the following recommendations:
- The Chairman of the SEC should direct the SEC’s Office of Investor Education and Advocacy, Office of Compliance Inspections and Examinations, Division of Enforcement, and other offices, as appropriate, to do the following:
- Incorporate into the SEC’s ongoing review of the financial literacy of investors an assessment of (i) the extent to which investors understand the titles and designations used by financial planners and (ii) the implications any lack of such understanding may have for consumers’ investment decisions; and
- Collaborate with state securities regulators in identifying methods to better understand the extent of problems specifically involving financial planners and financial planning services and take actions to address any problems that are identified.
- The National Association of Insurance Commissioners, in concert with other state insurance regulatory entities, should (i) assess consumers’ understanding of the standards of care that apply to persons who sell insurance products and (ii) take appropriate actions to address any problems in this regard. The GAO recognized the SEC’s ongoing efforts to address the standards of care that apply to investment advisers and broker-dealers, which would include financial planners acting in those capacities (see “Unclear Whether Customers Could Recover for Breach of New Fiduciary Standard” on page 13). The GAO, however, perceived that, even if that question is resolved, a similar question would exist to the extent that a financial planner acts in the capacity of an insurance agent.
The GAO considered but declined to recommend more sweeping changes, such as establishing a standards-setting oversight board or designating a self-regulatory organization for financial planners.