Friday, July 31, 2009

Report on reforms to restore investor confidence

On July 15 a blue-ribbon panel co-chaired by former SEC chairmen Bill Donaldson and Arthur Levitt issued their "Report on Financial Regulatory Reform: The Investor's Perspective" There are many encouraging comments in this report, including on page 14 where we find "In order to improve the quality of advice provided to retail investors and to protect them from abusive practices, the SEC should be empowered to reform compensation practices that create unacceptable conflicts of interest, improve pre-sale disclosures, and subject all those who provide personalized investment advice, including broker-dealers, to a fiduciary duty."

Page 15 of the report addresses the problems associated with "... a series of decisions by regulators over the years allowed brokerages to call their sales representatives "financial advisers," offer extensive personalized investment advice and market their services based on the advice offered, wall without regulating them as advisers.

We hope Congress will carefully consider the matters addressed in this report. Investors will be best served by advisers who are subjected to a fiduciary duty.