The SEC under the purview of the Dodd-Frank legislation is empowered to impose fiduciary standards on broker-dealers who give investment advice. Currently, brokers are held to suitability standards.
"They can recommend investment choices for clients, but they don't have to recommend investment actions that are in the best interest of the client," says Yuval Bar-Or, Ph.D., founder and president of the Light Brigade.
Meanwhile, the fiduciary standard to which investment advisers are held, "means, by law, they are required to always do what is in the best interest of their clients," says Bar-Or.
The SEC must study the issue for six months before issuing a ruling on it, an unnecessary delay, say consumer advocates.
"The elements that the study is meant to address should be apparent to people by now. It's important for consumers to realize that legislators have passed the buck to the SEC," Bar-Or says.
Among the issues being reviewed by the SEC are the existing standards and how effective they are at protecting retail investors, and whether those investors understand the differences between brokers and investment advisers.
"Studies have already taken place which established that people don't know what the difference is," says Bar-Or.