finra_logoOn May 1, 2015, Richard Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority (“FINRA”), reaffirmed his support for a uniform fiduciary standard for broker-dealers. Testifying before the House Financial Services Committee, Chairman Ketchum emphasized that the U.S. Securities and Exchange Commission (the “SEC”) – and not the U.S. Department of Labor (the “DOL”) – is best suited to establish and implement a new industry-wide standard of care.

Chairman Ketchum’s comments come less than three weeks after the DOL issued its highly anticipated, re-proposed regulation addressing when a person providing certain types of retirement investment advice is considered a fiduciary under the Employee Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (“Code”). At present, broker-dealer recommendations typically must be based on a reasonable determination that the investment is suitable in light of the investor’s financial situation and investment objectives. Under the proposed rule, broker-dealers providing retirement investment advice would be held to a higher (fiduciary) standard – they would be required to act in the best interest of their client.

Responding to questions from the House Committee, Chairman Ketchum noted his concern that the DOL’s proposed rule would result in different standards of care being applied to broker-dealers depending on the service provided. To help avoid potential confusion for brokers and their customers, Chairman Ketchum instead advocated that “[t]he right way to move forward is for the Commission to look at the possibility of a balanced fiduciary standard across all products.” Chairman Ketchum also explained that the SEC’s subject matter expertise made it the preferred agency to grapple with this issue.

In March, SEC Chairwoman Mary Jo White expressed her support for imposing a uniform fiduciary standard on the brokerage industry. However, it does not appear that the SEC is ready to issue a proposed rule any time soon. In a hearing before the House Financial Services Committee last month, Chairwoman White explained that the SEC was only in the early stages of the rulemaking process, noting that she would be discussing a potential uniform standard with her fellow Commissioners “in the very near term” and asking SEC staff “to develop rulemaking recommendations.” The SEC has authority to implement a uniform fiduciary standard pursuant to the Dodd-Frank Wall Street Reform Act.


Proskauer’s David Picon provides additional insight on the DOL’s proposed fiduciary standard and its potential impact on the brokerage industry here.