Di Santo LLP – Attorneys at Law

An often overlooked feature of the Senate Financial Reform Bill proposed by Senator Christopher Dodd would require insurance and stock brokers to register as advisers with the SEC.  This means that brokers would be subjected to the Investment Advisers Act of 1940, requiring them to act as fiduciaries to their clients.   Acting as a fiduciary for a client would mean putting that clients’ interests first, as registered investment advisers are legally required to do.  Brokers generally are held to a “suitability” standard, meaning recommendations must be suitable to the client but do not have to be the best for them.  Under the suitable standard brokers are free to pick the fund that pays them the biggest commission from among a group of suitable funds.  A fiduciary standard also would require brokers to prominently disclose any conflicts of interest.   Should the bill pass, this new fiduciary standard would also provide additional protections to investors in the sale of variable annuities, a product that often comes with high costs but pays above-average commissions to sellers, as brokers would have to show that it is the best of all available products.  If you or your company needs assistance or guidance concerning a securities dispute or a securities fraud matter, do not hesitate to contact Ignatius Grande at Di Santo LLP.