In July 2010, President Barack Obama signed into federal law the Dodd–Frank Wall Street Reform and Consumer Protection Act, which provided the SEC with the power to create a rule that would mandate all financial advisers act in the best interest of their clients. This rule is called the fiduciary-duty standard of care, which as of now solely applies to investment advisers. In the wake of that legislation, the Department of Labor proposed regulation that would broaden the meaning of “fiduciary” to financial advisers assisting clients with retirement plans, which would include brokers selling IRAs.
The future for investor protection seemed so bright, but any progress started in 2010 has slowed down considerably. In May 2014, the Department of Labor stated that a re-proposal of its rule will be delayed from August to January of next year. The original proposal was withdrawn after numerous fiery attacks from the financial industry, which contended that the proposal would increase liability and regulatory costs for brokers. Subsequently, these brokers would cease to serve the retirement plan market, and investors with small accounts would be hurt.
Despite these setbacks from the Department of Labor’s proposal, it is in a much better position than the SEC’s proposal. In fact, the SEC has yet to reach a decision as to whether to push for a fiduciary proposal at all. While support for an SEC fiduciary-duty rule applying to retail investment advice exists in the financial industry, there also exists apprehension regarding how the regulation would work for brokers.
An SEC rule is supported by the Securities Industry and Financial Markets Association provided that it complies with Dodd-Frank. Response to the Department of Labor proposal depends on prohibited-transaction exemptions, according to Fred Reish of Drinker Biddle & Reath.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.