October 20, 2009
Authentic
- “Prudence” is required
- Do not mislead; disclose all material facts (compensation, fees, expenses) in writing
- Control investment expenses
- Avoid conflicts, or disclose conflicts and always attain fully informed consent
- Managing conflicts in client’s interest
- Recognizes best execution in 40 Act As a fiduciary principle
SIFMA*
- “Good professional judgment”
- Does not address in testimony.
- Does not address in testimony.
- Avoid conflicts, or disclose conflicts, only sometimes w/ client consent.
- Does not require managing the conflict, except to disclose it, per testimony.
- Rebrands fair dealing obligations, suitability, limited disclosures, supervision and training as “core fiduciary principles.”
Comments+
- “Prudence” carries a legal duty that “professional judgment” does not. SIFMA makes no mention of “prudence” in its testimony.
- Carroll would not say SIFMA believes disclosure of fees is required; he suggests brokers’ “business model” may permit Brokers to not disclose compensation, fees, expenses, etc.
- Carroll would not say SIFMA believes brokers must control investment expenses; he does say all businesses try to control business expenses, generally.
- SIFMA suggests “consent” is only sometimes required. It does not say fully informed client consent is always required.
- Fully informed client consent means a client understands costs, risks, and benefits of conflict, as well as available alternatives
- Managing the conflict in the client’s interest is fundamental to duty of loyalty
*SIFMA position based on October 6 testimony.
+ Comments based on comparison of testimony with authentic standard and additional remarks by Kevin Carroll, SIFMA Managing Director, in October 7 Webinar.