a rule. However, industry experts predicted those efforts would prove futile.

While Fiduciary September is important because it raises the profile of the issue and reignites the discussion, Roper said during the conference call that was held by the Institute for the Fiduciary Standard in early September, it may not be enough to boost the chances of any real action taking place. But it looks as though the Department of labor (DOl) could repropose its fiduciary rule before year-end. Ron Rhoades, assistant professor and chairman of the financial planning program at Alfred State College, who was also on the call with Roper and Rostad, said that hes heard rumblings that the DOl plans to repropose its fiduciary rule in November, depending on which way the election goes. DOl, Roper said, has continued to move forward with its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act (ERISA), and DOls spirit on this issue has the ability to get this [fiduciary] issue moving again at the SEC. Roper also remarked that the advisory industry needs to cooperate with the Securities Industry and Financial Markets Association (SIFMA)Wall Streets lobbying groupif it stands a chance of jump-starting the process at the SEC again. Rostad argued that SIFMAs approach to a fiduciary standard is a sales/broker standard and not a fiduciary standard at all. But Roper countered that the best chance to get the SEC moving again on a fiduciary rulemaking is to focus on areas where SIFMA and the advisory industry agree regarding how the SEC should craft a fiduciary duty for brokers. Its important to highlight the areas of agreement regarding the appropriate approach, which are significant, rather than always highlighting our differences, Roper told me. While the differences are important and cant be ignored, our best chance of success will come if we can build from that common ground and treat each others viewpoint with respect. Roper laid out the areas where SIFMA and the advisory industry agree. We

harmonizing dol, sec Fiduciary rules Is too tough: fi360

Fi360 told memBers of congress recently that asking the Department of Labor (DOL) and Securities and exchange commission (Sec) to harmonize their fiduciary rules would create significant challenges, as the fiduciary standards under securities laws and the employee retirement Income Security Act (erISA) are quite different. Blaine Aiken, fi360s CEO, and Duane Thompson, senior policy analyst for fi360, told members of the House Financial Services committee that if the Sec and DOL were to truly harmonize their rulessomething congress has been pressing the agencies to dothen the agencies would be left with one of two stark choices: require the Sec to impose a higher standard commensurate with erISA standards, or require the DOL to violate clear legislative requirements under erISA and thereby weaken the strong fiduciary protections now afforded to retirement plan participants. Stated another way, Aiken and thompson said, it is our view that an act of congress is necessary to clear up conflicting areas of the two laws and to provide both agencies with sufficient guidance to proceed if rules harmonization were the primary objective (which, by the way, we believe is neither wise nor consistent with long-standing public policies in this area of law). For instance, the two told lawmakers that the fiduciary standards under both laws are historically quite different in their purpose and application, resulting in significant challenges when attempting to harmonize rules that cover retirement planning activities under each law. blaine and thompson argue that under the Advisers Act of 1940, whether the clients financial goal is saving patiently for the long-term to ensure financial security in retirement, or investing in penny stocks to get rich tomorrow, the fiduciary standard under the Advisers Act permits a large amount of discretion in an advisors decision-making process to accommodate the clients objectives. However, application of a fiduciary standard under erISA is far different, they said, in that it imposes fiduciary duties in addition to any specified duties of disclosure.

both support moving forward through parallel rules under the Advisers Act and Exchange Act establishing a principlesbased rule for personalized investment advice to retail investors, supported by a combination of rules and guidance to help clarify how that standard applies to the broker-dealer business model, she said. And, I think we also agree that it was the clear intent of Congress to preserve the ability of brokers to offer advice within the context of a sales-based business model; in other words, that the goal was not to eliminate conflicts but to ensure that any conflicts were fully disclosed and appropriately managed. fiNRa Rules coulD pRoViDe substitute foR fiDuciaRy staNDaRD If the SEC proves incapable of moving forward on fiduciary rulemaking, Roper said its also possible to make progress raising the standard of conduct for brokers and improving the

ability of investors to make an informed selection of financial intermediaries through FINRA rulemaking, pointing to FINRAs recently amended suitability rule, and its concept release that would require a disclosure statement be presented to retail investors at or before commencing a business relationship. But Rhoades said FINRAs new suitability rule is still only a minor improvement. There is still a huge difference between suitability requirements and the fiduciary standard.

the takeaway
a fiduciary rule from the seC is likely three or four years away the Dol could still repropose a rule before year-end FiNras suitability rule is a minor substitute for a fiduciary standard

Washington Bureau chief Melanie Waddell can be reached at mwaddell@investmentadvisor.com.

72 | Investment AdvIsor OctOber 2012 | AdvisorOne.com

Copyright of Investment Advisor is the property of Summit Business Media and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.