The SEC's Continuing Quest for a Harmonized Standard of Care Governing Broker-Dealers and Investment Advisers

Abstract

This document reviews the latest chapter in the long-running and continually evolving debate over the appropriate standard of care for broker-dealers and investments advisers under the federal securities laws. Following the SEC’s report to Congress under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) of its Study Regarding a Harmonized Standard of Care for Broker-Dealers and Investment Advisers in January 2012. The U.S. Securities and Exchange Commission (“SEC”) published a Request for Data and Information (RFDI) in March 2013 that elicits input on the costs and burdens of several hypothetical approaches to harmonizing the standards of care governing broker-dealers and investment advisers. This material will highlight the SEC’s Request for Data and Information, summarize public input, and provide context within which to evaluate the FRDI in in view of the many stages of the regulatory examination of broker-dealer and investment adviser standards of care. Collectively, this information should provide a roadmap for evaluating the status of a harmonized standard of care for broker-dealers and investment advisers.Many catalysts for change have contributed to this latest regulatory development on a standard of care, including regulatory solutions galvanized by profound economic turmoil, and competing industry and regulatory initiatives. The document reviews these agents for change that ultimately led to a congressionally mandated SEC study on a harmonized broker-dealer and investment adviser standard of care in the Dodd-Frank Act. The material also charts regulatory and industry positions, addresses various regulatory and legislative solutions that functioned as substantive preludes to the Dodd-Frank Act and provides a framework of statutory and regulatory background.