I have a feeling that SEC Chairman Mary Schapiro chooses her words pretty carefully when she's speaking in public. So when she uses a phrase like "harmonized" fiduciary standard, as she did this morning in a Chicagospeech before a group of corporate secretaries and governance professionals, it makes me think she might be talking about something other than the fiduciary standard that investment advisers, IARs, adhere to--the one applied under the Investment Adviser's Act of 1940, which requires that investment advisers put client interests first, before their own. But how exactly is it different?
That phrase--"harmonized fiduciary standard"--has been used before, by SIFMA, the broker/dealer lobbying group, in its testimony before Congress. SIFMA President John Taft explains what this means in his testimony last October:
A fiduciary must put "investors’ interests first," and also "act with good professional judgment, and avoid conflicts of interest, if possible, or otherwise effectively manage conflicts through clear disclosure and, as appropriate, investor consent."
The current Wall Street reform legislation, which has been approved by the House but is still pending a Senate vote, requires the SEC to do a 6-month study of regulatory harmonization and gives the SEC authority to extend, specifically, the 1940 Act fiduciary standard to brokers when they provide personalized investment advice, with a couple of caveats. In her speech this is what Schapiro said:
"The legislation also gives the SEC authority to promulgate rules that would impose a harmonized fiduciary standard on broker-dealers and investment advisers who provide personalized investment advice to retail or other customers. I have long advocated such a uniform fiduciary standard and I am pleased the legislation would provide us with rulemaking authority necessary to implement it.”
Am I splitting hairs? Perhaps. "Schapiro has talked about fiduciary standard and has said that means acting in the best interest of client or customer," says Kristina Fausti, director of legal and regulatory affairs at consulting group Fi360."[Commissioner Elise] Walter has mostly said she is interested in having professionals held to the same standard, a fiduciary standard, but she hasn’t defined that. And she has often said she doesn’t think the SEC has been very good at defining [the fiduciary standard] and how it applies to different situations. Because of that lack of clarity, it opens the possibility that she’s not thinking 1940 Act fiduciary standard."