We have to admit that we've read only a small portion of the Study on Investment Advisers and Broker-Dealers issued by the Securities and Exchange Commission. We have excerpted a  section of the Executive Summary in order to reveal the breadth and subjects covered in study. It was prepared "As Required by Section 913 of the Dodd-Frank Wall Street Reform."

The Summary sets the stage:

"Retail investors seek guidance from broker-dealers and investment advisers to manage their investments and to meet their own and their families’ financial goals.  These investors rely on broker-dealers and investment advisers for investment advice and expect that advice to be given in the investors’ best interest.  The regulatory regime that governs the provision of investment advice to retail investors is essential to assuring the integrity of that advice and to matching legal obligations with the expectations and needs of investors. "

"Broker-dealers and investment advisers are regulated extensively, but the regulatory regimes differ, and broker-dealers and investment advisers are subject to different standards under federal law when providing investment advice about securities.  Retail investors generally are not aware of these differences or their legal implications.  Many investors are also confused by the different standards of care that apply to investment advisers and broker-dealers. That investor confusion has been a source of concern for regulators and Congress. "

Furthermore, the SEC has laid out the upcoming activity surrounding the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This activity will cover derivatives, oversight, credit ratings, asset-backed securities and corporate governance and disclosure.

"The following recommendations suggest a path toward implementing a uniform fiduciary standard for investment advisers and broker-dealers when providing personalized investment advice about securities to retail customers: "

• Standard of Conduct:  The Commission should exercise its rulemaking authority to implement the uniform fiduciary standard of conduct for broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers.  Specifically, the Staff recommends that the uniform fiduciary standard of conduct established by the Commission should provide that:

the standard of conduct for all brokers, dealers, and investment advisers, when providing personalized investment advice about securities to retail customers (and such other customers as the Commission may by rule provide), shall be to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser providing the advice.

Implementing the Uniform Fiduciary Standard:
The Commission should engage in rulemaking and/or issue interpretive guidance addressing the components of the uniform fiduciary standard:  the duties of loyalty and care.  In doing so, the Commission should identify specific examples of potentially relevant and common material conflicts of interest in order to facilitate a smooth transition to the new standard by broker-dealers and consistent interpretations by broker-dealers and investment advisers.  The Staff is of the view that the existing guidance and precedent under the Advisers Act regarding fiduciary duty, as developed primarily through Commission interpretive pronouncements under the antifraud provisions of the Advisers Act, and through case law and numerous enforcement actions, will continue to apply.

• Duty of Loyalty:  A uniform standard of conduct will obligate both investment advisers and broker-dealers to eliminate or disclose conflicts of interest. The Commission should prohibit certain conflicts and facilitate the provision of  uniform, simple and clear disclosures to retail investors about the terms of their relationships with broker-dealers and investment advisers, including any material conflicts of interest.

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