A commissioner at the U.S. Securities and Exchange Commission insists that anyone providing investment advice should be held to a fiduciary standard.

In a speech to the Investment Adviser Association Annual Conference in Chicago Thursday, SEC commissioner Luis Aguilar argued in favour of regulatory reform to to extend fiduciary duties to broker dealers providing advice.

“This is the ultimate investor protection issue,” he said, “because the harm to investors is real if broker-dealers giving advice are not held to the fiduciary standard and fail to put their client’s interests before their own.”
 
“The fiduciary standard guards against the inherent bias that arises when the broker-dealer is focusing on selling a product, rather than focusing only on what is best for a client,” he said, pointing out that advice tainted by conflicts of interest can lead to investor harm. Permitting brokers to provide investment advice without requiring them to act as fiduciaries leaves investors vulnerable abuse, he noted.

“If you are giving investment advice to an investor, regardless of the title on the business card, you should always be bound to do so in the best interests of the client. While the scope of service may vary between clients, the standards of loyalty and care in providing that service should not,” he said.

Extending the fiduciary duty from investment advisers to broker dealers was originally part of planned regulatory reforms in the U.S. Although industry lobbying and efforts to reach bipartisan agreement have since watered down those plans, and the final look of the plan has yet to be reached.

“I continue to have concerns about this retreat from requiring a fiduciary standard for all who provide investment advice,” Aguilar said. “I don’t believe that we need an additional study to conclude that protection of investors requires that broker-dealers providing investment advice be subject to fiduciary duties. I think that question has long ago been asked and answered.”