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The SEC wants to hear from you!

By Barbara Whelehan ·
Friday, July 30, 2010
Posted: 3 pm ET

Have you ever dealt with a broker who foiled your retirement plans? Now's your chance to tell an authority that is willing to listen.

The Securities and Exchange Commission is soliciting public comments to evaluate whether broker-dealers should be held to the same standard as investment advisers.

If you're not aware that they are held to different standards, join the crowd. There's a lot of confusion about this, but the SEC wants to make sure this confusion exists before it does anything about it.

Frankly, I find it confusing because brokers often call themselves financial consultants and advisers. So how is anyone supposed to know what they truly are? Bankrate's story "Finding a financial planner" helps explain the nuances.

In a nutshell: Brokers are held to suitability standards, which are looser than the standards to which investment advisers are held. As fiduciaries, investment advisers must serve their clients' best interests.

I have a friend -- let's call her Gullible Gladys -- who lost much of her inheritance to an unscrupulous broker who bought and sold securities on her behalf. Her mistake: She trusted he would act in her best interests. Instead, he churned her account, earning commissions on each trade, until her account dwindled down to a fraction of its former worth.

By the way, this happened during the 1990s, when chimpanzees could pick stocks as adroitly as seasoned money managers.

Bankrate's story called "Do investors win with the Frank-Dodd Act?" gives a little more background about the SEC's study and what it hopes to accomplish.

But here's an explanation from the SEC itself: It wishes to evaluate "the effectiveness of existing legal or regulatory standards of care for brokers, dealers, investment advisers, and persons associated with them when providing personalized investment advice and recommendations about securities to retail investors; and whether there are gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to the standards of care for these intermediaries."

Oh, brother! Why do government releases have to be so clunky and full of legalese? The release goes on for seven pages, saying the same thing over and over again.

The issue of different standards of care has been simmering for years. Brokers and dealers have been resistant to the idea of being held to higher standards. Why? Well, for one thing, it's going to cost them time, money and energy. For another, they are under constant pressure to generate revenues for their firms. How will they be able to make a lot of money off their customers and still serve their best interests? It's a dilemma that might interfere with their clients' retirement plans.

This conflict won't be resolved until the SEC gets irrefutable evidence that brokers should be held to a higher standard. Let's give the SEC an earful. We've got a month to submit our comments.


Have you been ripped off by a broker or an investment adviser? Share your experiences, but please don't use specific names or I'll have to delete your comment.

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August 01, 2010 at 1:26 pm

Is this the same SEC that watches more porn than the economy? Anybody reading this and thinks that the deck isn't stacked against them is being dishonest with themselves. The SEC is told what it can and can't do. They have no real power. All the power belongs to the guys with the gold. The guys with gold only know how to lie cheat and steal. So by default the SEC only knows how to lie cheat and steal for the people who are the puppet masters.
If you think posting any boohoo stories here are going to make a difference you are wrong. These posts are for the sec to look at and laugh while they are taking a break from watching porn all day.

Ed Bradford
July 31, 2010 at 11:49 pm

SEC----You jerks need to go down---you allow this criminal NSS and these people destroy companies---and you know it and do nothing----

July 31, 2010 at 4:17 pm

Why would/should I ever expect anything of benefit from a gov't org. that does not comply with the Freedom Of Information Act. Giving them any more personal info., hard to believe that they don't know everything already, seems to be just inviting the wolf into the sheep enclosure.

Transparency seems to only apply to the average citizen, not to the government or its reps. whom we elect. Though the word does seem to get tossed around ALOT before the elections.