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New Salvo in Debate Over Fidiciary Duty Reform

The debate over the inclusion of a single fiduciary standard in financial reform legislation is now being hit with a new lobbyist assault under the guise of legislator education. The insurance industry lobbyist machine, perhaps the most vehement opposition to sweeping fiduciary reform, now wishes for the Senate to authorize a study over the implications of passing a single fiduciary standard for both broker/dealers and Registered Independent Advisors (RIAs). Currently, RIAs have a fiduciary duty to their clients that amounts to greater liability in the event of a bad investment. This duty requires them to act in the best interest of their client when giving recommendations and advice.

The call for a new study is seen by many as a stalling technique with the goal of dissuading current supporters of a single fiduciary standard in the interim. What makes this tactic more transparent is the fact that a currently published study conducted by the Rand Corporation addresses the need for the legislation being considered.

Investment News reports that in response to the call for a new study which would be paid for with tax-payer dollars, a letter was sent by a laundry list of financial industry associations arguing that insurance groups have made up “myths” in an attempt to dissuade a single fiduciary standard. The January 7th letter was signed by:

– Fund Democracy Inc.

– The Certified Financial Planner Board of Standards Inc.

– The Consumer Federation of America

– The Financial Planning Association

– The Investment Adviser Association

– The National Association of Personal Financial Advisors

– The North American Securities Administrators Association Inc.

The letter, which was sent to Senator Chris Dodd (D-Conn) and Senator Richard Shelby (R-Ala), charges that the insurance industry is engaging in, “a particularly virulent attack on the legislation, aimed at eliminating entirely the provision requiring a fiduciary duty for financial professionals and replacing it with an unnecessary study at taxpayer expense.” It remains to be seen whether or not the study will be authorized, but it is clear that the debate over inclusion of a single fiduciary standard in the financial reform legislation is far from over.