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Titles advisers use to play a bigger role in fiduciary regulation

InvestmentNews
January 10, 2017

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Traditionally, regulation has focused on the functional definition of fiduciary. That is, fiduciary status is triggered by what you do, not what you call yourself. While that is largely true of the Department of Labor's conflict-of-interest rule as well, the rule does plow new ground by saying for the first time that holding out as a fiduciary means you are one. As simple as that may sound, it wasn't true in the past. And though uncertainty prevails around the future of the fiduciary rule under a new administration, there are clear indications that the titles financial advisers use will play a bigger role in fiduciary regulation going forward. Even opponents of the DOL rule appear to be zeroing in on titles that cause confusion with the investing public.

Last month, we had a preview of what the debate over a new fiduciary standard might look like in the form of legislation passed by the House of Representatives. House Bill 5983, the Financial Choice Act of 2016, was authored by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, as part of a larger package to repeal much of the Dodd-Frank Reform Act and the DOL fiduciary rule. While the bill was never passed by the Senate and died when the 114th Congress adjourned, interest in accomplishing the bill's objectives lives on.

The bill would have required the SEC to submit a report on a number of issues related to the impact of a fiduciary standard on consumers and the industry, including a review of alternative remedies to a fiduciary standard such as “simplifying the titles used by brokers, dealers and investment advisers and enhancing disclosure surrounding the different standards of conduct currently applicable to brokers, dealers and investment advisers.” Read More.

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