Whether a financial advisor has a fiduciary duty to the investor has always been a hot buttom point of contention in many securities litigation cases. The broker-dealers have always tried to take the position that the broker does not owe a fiduciary duty to the client, whereas the investor almost always testifies that they relied on the financial advisor implicitly and believed that the financial advisor was acting in their best interests.
A new proposal by President Obama may clarify this once and for all. The proposal aims to help individual investors who are “confused” about the obligations of broker-dealers, according to the administration’s plan for financial regulatory overhaul released June 17. Brokers currently must meet a legal “suitability standard” while most investment advisers and financial planners have a fiduciary duty to their clients.
“Investors haven’t been able to distinguish between someone who’s acting in their best interest and someone pitching them a product for the last several decades,” said Roper, director of investor protection at the Washington-based Consumer Federation of America. “If properly implemented, the plan has the potential to finally tilt the scale in the investor’s favor.”
The U.S. Securities and Exchange Commission would be given the authority to establish a fiduciary duty for broker-dealers who offer investment advice. The regulator would also be able to ban compensation for products that are not in the investor’s best interest and enhance disclosure agreements.
“When investors receive similar services from similar financial-service providers, they should be subject to the same standard of conduct,” SEC Chairman Mary Schapiro said yesterday at an event held by the New York Financial Writers’ Association.
If you have questions about investment advice you received from your financial advisor, The White Law Group can help. To speak to a securities attorney, please call our Chicago Office at 312-238-9650 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investors protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
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Tags: fiduciary duty, securities fraud attorney Last modified: December 7, 2022