NYC Comptroller Wants Brokers To State They Are Not Fiduciaries

Apr. 03, 2015 4:08 PM ET
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New York City comptroller Scott M. Stringer is pushing the state legislature to pass a law that would clarify the distinction between brokers and investment advisers to investors. Stringer's proposal would mandate that all financial advisers directly state whether they must act in their clients' best interests.

"We need a uniform, national fiduciary standard, but we can't wait to give New Yorkers the common sense reforms they need to make informed investment choices," Mr. Stringer stated. "This new law will ensure that New Yorkers know whether the investment advice they receive is in their best interest."

Currently, investment advisers must operate under a fiduciary standard, but brokers must only recommend products that are suitable to the investor.

Stringer's proposal would mandate the following disclosure orally and in writing at the outset of a financial relationship, at frequent intervals, and in advertising: "I am not a fiduciary. Therefore, I am not required to act in your best interests, and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks and expected return for you."

A report from Stringer's office claims that "[r]equiring this plain-language, unambiguous statement in advertising and at frequent intervals during the advisory relationship can help reduce consumer confusion and improve the investment security of all New Yorkers."

Stringer wants this proposal to move ahead, while federal regulators are still moving slowly on the issue. As Knut Rostad, President of the Institute for the Fiduciary Standard, stated, "This is what states are supposed to do as laboratories of democracy. It's urgently needed, and the feds won't do it."

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