August 29, 2010
SEC Commissioners
Barbara Roper once said that all fraud and abuse is a question of compensation. The fiduciary standard (putting the client's interest first) for those who operate functionally as financial advisors while preferable doesn't address the compensation issue which goes to the heart of the matter.
And you have had the ability to address compensation 'by rule' functionally since the 1940 Act but Leavitt et al have passed on
I should know.
I authored - three times - and three times defeated even with Republican and Democrat sponsorship at different times, legislation in the 80's and early '90's that would have required and upfront disclosure by amount of an estimate of all compensation followed by quarterly actual amounts. Estimated amounts NOT compensation method would have been required.
In the last go around, this would have applied not only to personal financial planners (and those acting in that functional capacity - even the CPAs who tried to dance around coverage by claiming incidental which was bs on their part) but those acting as financial advisors. As such, this might have prevented BY FULL (NOT FOOL) UPFRONT AND TIMELY DISCLOSURE some of the mortgage fraud.
To not subject the brokers to a fiduciary standard is laughable - as selling requires definition of need. Thus, unless it is fill or kill, they are advisors.
Upfront full and timely disclosure of estimate compensation in amounts (and actual amount quarterly thereafter) and fiduciary status is a MUST.
Jim Schwartz