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Fiduciary not a front-burner issue

By Sheyna Steiner · Bankrate.com
Wednesday, July 31, 2013
Posted: 12 pm ET

On Tuesday, Mary Jo White, the chairman of the Securities and Exchange Commission, spoke to the Senate Banking Committee about the myriad issues for which the SEC must formulate new rules.

One of the mandatory rules the SEC was charged with creating involves crowd funding. That's the process that would let small businesses and individuals raise money from investors in exchange for an equity stake in the company. Currently, only accredited investors -- those with a net worth of at least $1 million -- can get in on similar deals. Startups can petition crowds for cash online but only in exchange for products, services or the less highly valued gratitude.

The regulator has the crowd-funding rule cooking on a front burner, which could mean a new rule on crowdsourced equity funding as soon as fall, InvestmentNews reported on Tuesday.

Unfortunately for investors, a ruling on a uniform fiduciary standard isn't as pressing and isn't mandatory. The Commission is still laboring on a cost-benefit analysis of raising the standard of care to clients for all financial professionals. The agency will decide as quickly as possible whether or not raising standards makes sense, according to InvestmentNews.

It's a funny juxtaposition. The regulator tasked with protecting investors hastens a rule that could, depending on how it's done, let unsophisticated investors bet on untested business ventures, while a rule that would strengthen investor protections may never materialize.

Which rule would you prefer?

Follow me on Twitter: @SheynaSteiner.

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Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.

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