In recent congressional testimony, the president of the Securities Industry and Financial Markets Association (SIFMA) recommended the formulation of a “universal standard of care” that would express fundamental principles of fair dealing that individual investors can expect from all of their financial services providers. The same standard would apply regardless of whether the service provider is, for example, a financial planner, investment adviser, securities broker-dealer, bank, or insurance agency.
This is one of many recent proposals to reconcile or harmonize the currently disparate duties that different types of financial service providers owe to their customers. Investment advisers, for example, generally owe a fiduciary duty to their customers, whereas securities broker-dealers generally are subject only to lesser duties of fair dealing.
SIFMA’s proposed universal standard presumably would be lower than the standard currently applicable to providers who are fiduciaries, which would cause controversy. Continued applicability of fiduciary duties for at least some providers is favored by, among others, the Financial Planning Association, the North American Securities Administrators Association, the President of the Investment Company Institute, the Investment Adviser Association, and the Consumer Federation of America.
Because of the recent tenure of SEC Chair Schapiro and Commissioner Walter as senior FINRA officers, some supposed they would be sympathetic to FINRA’s proposal. However, both Schapiro and Walter, as well as Commissioner Aguilar, have made recent statements recognizing the merits of fiduciary duties with respect to at least some types of financial services.
While there is broad agreement that providers of comparable financial services should be subject to comparable duties to their customers, there seems much less agreement on whether a single standard in this regard should apply for all types of financial services or whether any such standard should be a fiduciary standard.