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Blaine Aikin
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Jon, Thank you for your comments. You are correct that most attention during the regulatory reform process has been focused upon the extension of the fiduciary standard to all who give advice to retail investors. However, the issue is broadening. For example, see this link: http://www.bondbuyer.com/issues/119_325/otc_swap_bills-1011169-1.html. Those who provide financial services are governed by either fiduciary and fair dealing standards. This is true regardless of whether they are working with institutional or retail investors. Reasonable people can disagree about whether the fiduciary standard should be extended to a broader array of relationships. However, in my view, reasonable people should not disagree that there is a big difference between the two standards. My central point in the blog post is that the Goldman case demonstrates that (contrary to what some have argued) the obligations for disclosure and care are much lower under the fair dealing standard than under the fiduciary standard. Goldman is saying that the SEC’s interpretation of what the fair dealing standard requires is too high. If that view holds, the gap between the fair dealing standard and the fiduciary standard is truly huge – even bigger than the already large gap most well-informed and objective people acknowledge. Given that fiduciary and fair dealing are the two alternative standards that could apply regardless of the type of investor involved, it is appropriate to draw attention to the fact that this institutional case provides a directly applicable cautionary tale for the advice to retail investors issue. It undermines the argument that some have made in regard to the advice to retail investors debate that the difference between the fiduciary and fair dealing standards is no big deal.
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Yesterday’s “Fiduciary Links” post provided links to articles that highlighted possible fiduciary ramifications of the SEC’s suit against Goldman Sachs. These articles touched upon alleged conduct by Goldman that exemplify clear breaches of fiduciary responsibility, such as conflicts of interest... Continue reading
Posted Apr 21, 2010 at fi360 Blog
Morris raises a good point that regulators are more potent than professional organizations in enforcing fiduciary conduct. However, as I recently wrote in Investment News, if the financial services industry doesn't do more to become a true profession by embracing a fiduciary standard of care, it invites more regulation. That is why I view it as a positive step in the right direction for the CFP Board to forcefully remind members that they are fiduciaries. As someone holding the AIFA, CFA and CFP, I want to be associated with designations that makes clear member obligations and has the means to take action to lift the designation from those who act improperly. More attention from within the profession to building a fiduciary culture from the bottom up may help to minimize the need for regulators to attack the issue in more heavy-handed and inefficient ways from the top down.
Toggle Commented Aug 27, 2008 on Fiduciary Links at fi360 Blog
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