Investment advisers and consumer advocates have applauded President Obama’s proposal to establish a fiduciary duty for broker-dealers offering investment advice. “We think it’s great,” said Diahann Lassus, chairwoman of the National Association of Personal Financial Advisors in Arlington Heights, Ill. “There should be a fiduciary standard for all advisers.”
Richard Salmen, president of the Denver-based Financial Planning Association, agrees.
“I’m encouraged by the fact that the administration is proposing a fiduciary standard for all that provide advice to the public,” he said. “That’s a positive sign.”
The proposal was part of a historic reform package unveiled by the White House last Wednesday that is intended to overhaul nearly every aspect of Wall Street in order to prevent another financial crisis.
Both the FPA and NAPFA have been ardent proponents of requiring brokers offering investment advice to be brought under a fiduciary standard, which would require that they put their clients’ interests ahead of their own. Currently, brokers are required to meet a suitability standard, meaning the advice and products they offer have to be suitable for their clients.
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that plays a critical role in overseeing U.S. broker-dealers and protecting investors. Established in 2007 through the consolidation of the National Association of Securities Dealers (NASD) and the regulation, enforcement, and arbitration operations of the New York Stock Exchange (NYSE), FINRA operates as an independent, non-governmental entity. Its primary mission is to safeguard the integrity of the securities industry by enforcing rules that ensure fair and ethical conduct among broker-dealers and their registered representatives.
FINRA’s responsibilities include writing and enforcing rules that govern the activities of its member firms, conducting examinations and audits to ensure compliance with these rules, and administering a dispute resolution forum for investors and broker-dealers. Through these activities, FINRA promotes market transparency and fosters investor confidence.
Investor education is another key component of FINRA’s mission. The organization offers a wealth of resources to help individuals make informed investment decisions and recognize potential fraud. Additionally, FINRA maintains a public database, BrokerCheck, which provides detailed information about brokers and brokerage firms, including their professional backgrounds and disciplinary histories.
By maintaining a robust regulatory framework and emphasizing investor protection, FINRA plays an essential role in the stability and integrity of the U.S. securities markets, ensuring they operate fairly and efficiently for all participants.