Our Chief Compliance officer Rafael Perez provides a good overview of the Fiduciary Rule below. In coming months, he’ll be writing a series of articles on legal standards related to brokers and advisers. Our industry has become a thicket of rules and regulations with compliance an increasingly complicated and costly issue for RIA firms. As an attorney and investment adviser, Rafael has a unique perspective on these issues.
As for the Fiduciary Rule, I agree with Rafael’s conclusion that the rule, if nothing else, has highlighted the difference between a broker and an investment adviser and the public is better off for the debate having been engaged.
However, I take a somewhat simpler view of these issues. I do not believe a broker can act as a fiduciary to an investor seeking advice for his personal investments for one simple reason – he can’t serve two masters. A broker already owes a fiduciary duty to his client. It’s just that his client is not the public that buys his wares; his client is the issuer of securities, companies, municipalities, mutual fund companies and other investment product manufacturers. And frankly, Wall Street is already failing at fulfilling this duty. Any IPO that has a large pop on the first day of trading is a failure of the brokerage underwriter to meet his fiduciary duty to his client. What is needed is more education, not a blurring of the lines between advisers and brokers.
AN OVERVIEW OF THE FIDUCIARY RULE
By Rafael A. Perez, Esq.
Chief Compliance Officer
Alhambra Investment Partners, LLC
It is exceedingly rare that I would lament the repeal of a proposed government regulation.As a believer that those providing investment advice should place their client’s interest ahead of their own, I am concerned by the likely non-implementation of the “Fiduciary Rule” and the rationale for such non-implementation proffered by some in the securities industry.Let’s take a look at each of the underlying concepts and their effect on individual investors:
Leave A Comment