Today, the U.S. Department of Labor released a controversial proposals that would force financial advisers to put their clients’ interest ahead of their own when recommending retirement investments. While seemingly a commons sense concept, it has proven to be elusive in practice.
The rule, which is fiercely opposed by many brokerage professionals as it will expand the number of financial advisers subject to the so-called fiduciary standard that was originally established under the 1974 Employee Retirement Income Security Act (ERISA) by eliminating exemptions that currently allow advisers to push investment vehicles that provide the brokers with a significant upside even when those investments are not the best option for clients.
The Labor Department’s rule attempts to eliminate inherent conflicts of interest by forcing broker-dealers who provide one-time advice, meaning that they do not provide ongoing management of funds and other services, to fall under the definition of investment advisers under ERISA guidelines. The other exemption to be eliminated says for a broker to be considered a fiduciary, the adviser and the client must agree that information provided by the broker was the primary basis for the client's investment decision.
Most financial advisers also operate under securities laws and are regulated by the U.S.Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), which have different standards for financial advice than the United States Department of Labor. The SEC is also considering enhancements to its own fiduciary standard requirement.
The experienced securities fraud attorneys at Colling Gilbert Wright & Carter have successfully represented hundreds of investors in cases alleging breaches of fiduciary duty as well as many other allegations of impropriety. If you have suffered losses due to the malfeasance on the part of your financial advisor, please contact us for a free case evaluation