Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Fiduciary Duties and Investment Professionals: What’s the Big Difference?
Author: Dan Brecher
Date: July 10, 2013
Key Contacts
Back
The Securities and Exchange Commission (SEC) is currently considering whether investment advisers and securities brokers should be held to the same standard of care when dealing with clients. The uniform fiduciary standard was authorized under the Dodd-Frank financial reform law and has been hotly debated since 2011.
While the fiduciary standard already applies to financial advisers, brokers who do not exercise discretionary or other control over their customer’s account are currently held to a much lower “suitability” standard. In broad terms, brokers are only required to recommend securities that meet a client’s investment goals, given factors such as age, health, investment sophistication and risk tolerance. For brokers who are mere order takers, it seems fair not to impose the financial adviser’s fiduciary duty upon them.
The fiduciary standard would require both brokers and advisors to act in their clients’ best interests and disclose to them all conflicts of interest. It is intended to harmonize regulations for advisers and broker-dealers and ease confusion among investors.
Earlier this spring, the SEC issued a request for data from the public and interested parties about whether to adopt a uniform standard of conduct for broker-dealers and investment advisers. The agency highlighted that many investors are unaware that while advisers are obligated to act in their clients’ best interest, brokers do not have the same obligation.
“Studies have shown that few investors realize that the standard of care they receive depends on the type of investment professional they use. And often investors do not know which type of financial professional they are relying on,” said acting SEC Chairman Elisse B. Walter. “This request for information will help us in our ongoing consideration of alternative standards of conduct for certain broker-dealers and investment advisers, as well as potential harmonization of other aspects of regulation in this area.”
The deadline for comments was last Friday. While it is unclear when the SEC may formally propose new regulations, the debate is continued to extend into the summer.
If you have any questions about the duty of care to investors or would like to discuss the legal issues involved, please contact me, Dan Brecher or the Scarinci Hollenbeck attorney with whom you work.
- Practices: Corporate Transactions & Business, Financial Services & Regulatory Practice
- Locations: New York City, Red Bank, NJ, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
New Jersey Will Contest Grounds Explained
How Courts Evaluate Testamentary Capacity and Undue Influence Will contests in New Jersey are difficult to win, given the strong presumption that a properly executed will reflects the testator’s intent. However, challenges based on lack of testamentary capacity and undue influence remain common, particularly where there are concerns about mental capacity or the involvement of […]
Author: Marc J. Comer
Legal Issues Before Bringing on Investors
Bringing on outside investors can provide the capital and strategic support a business needs to grow. However, raising capital also introduces important legal, financial, and operational considerations. Before bringing on investors, businesses should address key legal issues to reduce risk, streamline investor due diligence, and position the company for long-term success. Early preparation signals that […]
Author: Dan Brecher
SECURE 2.0 RMD Planning Strategies
How the Updated Law Shapes Retirement and Estate Planning The SECURE 2.0 Act of 2022 materially reshapes the required minimum distribution (RMD) landscape, extending tax deferral opportunities while accelerating distribution requirements for many beneficiaries. For high-net-worth individuals and families, these changes are not merely technical. They require a reassessment of retirement income strategies, beneficiary planning, […]
Author: Marc J. Comer
Buying Commercial Property in New Jersey: Legal Guide for Small Businesses
Small businesses considering buying commercial property in New Jersey must evaluate a range of legal, financial, and operational factors. While ownership can offer long-term value and control, it also introduces significant risks if not properly structured. This guide outlines key considerations to help New Jersey business owners make informed decisions, minimize legal exposure, and successfully […]
Author: Robert L. Baker, Jr.
The SEC’s Latest Guidance on Applying Federal Securities Laws to Tokenized Securities
On January 28, 2026, staff of the U.S. Securities and Exchange Commission’s Divisions of Corporation Finance, Investment Management, and Trading and Markets issued a joint statement clarifying how existing federal securities laws apply to tokenized securities. The SEC’s “Statement on Tokenized Securities” does not establish new law, but it does provide greater clarity on the […]
Author: Dan Brecher
Common Legal Mistakes NYC and New Jersey Business Owners Make
Operating a business in the New Jersey and New York City metropolitan region offers incredible opportunities, but it also requires navigating a dense and highly regulated legal environment. From entity formation to regulatory compliance, seemingly minor legal oversights can expose business owners to significant risk. In our work with businesses throughout the region, our attorneys […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.