Although the SEC’s Dodd-Frank mandated report that there should be a uniform fiduciary duty standard for broker-dealers and investments advisers is nearly two years old, we are no closer to seeing that become a reality. The question is why.
Some see the lack of a majority of SEC Commissioners in support a draft request for public input as the cause for delay. The stall may continue as long as the Commission remain currently constituted. Others think that the Department of Labor’s forthcoming rule on the definition of a fiduciary under ERISA as a possible development that may break the logjam.
The real question that must be asked is whether a uniform fiduciary duty standard is even worth the effort.
In the many cases that I have defended broker-dealers, it is hard to recall any where the claimant did not assert a claim for breach of fiduciary duty. Moreover, many arbitrators that I have observed make the general assumption that a broker-dealer serves as a fiduciary for its clients. In addition, some courts have already concluded that broker-dealers are fiduciaries to their customers.
In my view, the push, to the extent that one even remains, is one of optics. In other words, there is a perception that the public wants to see there be such a standard so some will continue to push for it. If anyone analyzed the issue hard enough, they would probably see that broker-dealers are already often held to such a standard, such that the effort to legislate it is one that is not needed.