Monday, June 22, 2009


On June 18, 2009, just one day after President Obama unveiled his white paper, SEC Chairman Mary L. Schapiro gave an address at the New York Financial Writers' Association Annual Awards Dinner in which she acknowledged that Obama's regulatory reform plan makes real progress in strengthening the SEC and ultimately improving investor protection.

In her address, Ms. Schapiro emphasized that under Obama's new plan the SEC still has an underlying duty to protect individual investors, and opined that one way to protect investors is to resolve the inherent problems associated with the regulatory regimes governing financial service providers. Accordingly, the SEC is re-assessing the standards of conduct applicable to all financial service providers in an effort to help investors more fully understand what is required of their financial professionals. “Investors are not well-served by a confusing array of varying disclosure, liability, recordkeeping and conflict management requirements,” Ms. Schapiro said.

Ms. Schapiro noted that although there are a multitude of choices for investors to consider when seeking financial advice or assistance, financial service providers often perform similar and overlapping functions. However, despite this commonality of services, financial professionals such as broker-dealers and investment advisors are subject to varying and inconsistent legal standards. Such a regulator structure, Ms. Schapiro stated, is faulty in that “when investors receive similar services from similar financial service providers, they should be subject to the same standard of conduct.” As such, the SEC is now focused on instituting consistent fiduciary standards of conduct applicable to all financial service providers that provide personalized investment advise about securities, regardless of their labels, which will help ensure that these professionals act at all times in the interests of the individual investors.

Harmonizing the regulatory regimes for financial service providers will no doubt minimize the confusion investors must face under the current regimes. However, in her address, Ms. Schapiro correctly acknowledged that the implementation of consistent fiduciary standards of conduct will do nothing to ensure that financial professionals adhere to the requisite standards. Instead, such a change is merely a first step aimed at protecting individual investors.

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