At least one Securities and Exchange Commission member believes that broker representatives have a fiduciary duty to their clients, and that is Luis Aguilar, reports Blaine F. Aikin in an article entitled “SEC’s Aguilar urges fiduciary standard” published in the June 7, 2009 edition of InvestmentNews. In a speech delivered May 7th at the Advisers Association’s annual conference, Commissioner Aguilar said that broker representatives increasingly provide investment advice, and such advisors have “an affirmative obligation to put a client’s interest above his or her own.” Aguilar warned that other “proposed standards may have the effect of diluting the existing high fiduciary standard that serves an as important investor protection.”
Mr. Aiken, president and chief executive of Fiduciary360 LP, writes: “It is encouraging to see that there is a voice on the SEC who is advocating for what is best for investors and for the investment advice profession.” We agree with Mr. Blaine’s opinion.
Whether by agreement, advertising, promises, or undertaking to act, brokerage firms and broker representatives increasingly offer an ongoing advisory and monitoring component in exchange for compensation. As Commissioner Aguilar points out, that brings those firms and representatives within the Investment Advisors Act of 1940, which imposes a fiduciary duty on such advice providers.
True investment professionals want to uphold the fiduciary standard and clearly set their profession apart from the “shark tank” world outside the fiduciary environment. True regulators like Aguilar realize that the fiduciary standard is, as Mr. Blaine puts it, “an essential requirement that must be compromised in the regulatory reform process.”