Although the SEC staff has recommended that investment advisers and broker-dealers be subject to a uniform fiduciary standard of conduct, the staff did not specifically state whether customers could claim damages for breach of the new standard.
The staff’s recommendation appears in an SEC staff study released in January, in response to a mandate in the Dodd-Frank reform legislation. Specifically, the study recommends that the SEC adopt a rule requiring that, when providing retail customers with personalized investment advice about securities, both investment advisers and broker-dealers must act in the customers’ best interest.
The study recommends that the new uniform standard be essentially the same as the current fiduciary duty that the federal Investment Advisers Act is construed to impose on investment advisers. A breach of this current fiduciary duty does not give rise to a private claim for damages by customers under the Investment Advisers Act. Likewise, the SEC staff may contemplate that its recommended uniform fiduciary standard not subject investment advisers or broker-dealers to private claims for damages.
Even so, under the staff’s recommendation, the uniform fiduciary standard would merely supplement (rather than supplant) “the existing investment adviser and broker-dealer regimes.” The study seems to contemplate that customers would still have any claim for damages that may exist under current law with respect to the conduct in question. For example, conduct by an investment adviser that would violate the uniform fiduciary standard of conduct may under current law give rise to private damage claims for, among other things, state law breach of fiduciary duty, negligence, or fraud. Likewise, such conduct by a broker-dealer may under current law give rise to private damage claims on various theories that would be independent of the uniform fiduciary standard of conduct.