Republican Senator Seeks to Water Down Fiduciary Standards in Pending Investor Rights Bill and Exempt Insurance Companies from Liability

The North American Securities Administrators Association is criticizing an amendment introduced by Sen. Susan Collins (R-Maine). SA 4009, an amendment to the Senate financial regulatory reform bill (S. 3217), would protect variable annuities sellers from the fiduciary standard. While her amendment imposes a fiduciary standard on broker-dealers that offer investment advice to retail customers, variable contract products and representative-investment companies would not have to adhere to this standard.

The NASAA and other critics say that the amendment proposes a weaker version of the standard that would leave the very victims the standard is supposed to protect in a vulnerable position. NASAA also says that Collins’ proposed standard falls short of the standard in the way that 1940 Investment Advisers Act defines it. In a release issued earlier this month, NASAA says that with seniors and other small investors often having to contend with abusive practices from agents and brokers who end up recommending certain products because they come with higher commissions or revenue sharing payments, NASAA stressed the need for Congress to require that investment advisers and brokers abide by “the fiduciary duty of the Investment Advisers Act.” The Consumer Federation of America agrees with NASAA’s position on the Collins amendment.

NASAA is placing its support behind amendment (SA 3889). Referred to as the “Honest Broker” amendment, the legislation proposes that the Securities and Exchange Commission adopt a rule that would extend the fiduciary duty under the Advisers Act to brokers who offer investment advice. SA 3889 was introduced by Senators Daniel Akaka (D-Hawaii) and Robert Menendez (D-N.J.).

Other proposed amendments include SA 3806, by Senator Ted Kaufman (D-Del.) and Sens. Arlen Specter (D-Pa.). Their amendment extends the fiduciary duty under the Advisers Act to broker-dealers. Their amendment also proposes criminal liability for willful violations of the duty. SA 3792, introduced by Sen. Barbara Boxer (D-Calif.), would make each financial services provider subject to a fiduciary duty. The amendment gives Commodity Futures Trading Commission and the SEC the authority to define, enforce, and clarify the duty for regulated enitites under their jurisdictions.

Related Web Resources:
Joint Letter Opposing Collins Amendment (PDF)

S.3217 – Restoring American Financial Stability Act of 2010

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