No Easy Road – Developing a Fiduciary Standard for Broker-Dealers


As everyone reading this article knows, we are embarking on a new era of securities regulation. When President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act1 on July 21, 2010, he proclaimed “These reforms represent the strongest consumer financial protections in history.”2 To achieve the legislation’s goals, many decisions will need to be made in the coming months by the SEC regarding how best to achieve the legislation’s purposes.

One of the most important decisions confronting the SEC as a result of the Dodd-Frank Act has to do with the legal standard that currently governs the relationship broker-dealers have with their customers. The suitability standard, which for decades has been the principal legal doctrine governing the broker dealer/customer relationship, appears to have been overtaken by the fiduciary standard. What remains unclear and unwritten is how this fiduciary standard will be defined.

To help broker-dealers prepare for a new legal standard, this article reviews the duties to which broker-dealers are currently subject in their dealings with customers and the legislation that will form the basis for any new legal standard.

Please see full article below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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