Mr. Chairman, “Rebuild the 40 Act Wall”

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

“Those who fail to learn from history are doomed to repeat it.”

RIAs must heed Churchill’s forewarning. The SEC’s proposed standards for brokers and advisors will erase the major rationale for the Advisers Act of 1940to differentiate advisors and brokers in regulation.

This is why RIAs need to remind the SEC how brokers and advisers differ. Just like butchers and dieticians or car dealers and Consumer Reports, advisers and brokers fill different roles in the same space.

Congratulations to SEC Chairman Jay Clayton for proposing these rules. They’re welcome. But as various commissioners suggested, they can be much improved.

The proposed rules were long in coming. On June 18, 2009, one day after the Treasury Department recommended that brokerspersonalized advice be held to the fiduciary standard, then SEC Chair, Mary Schapiro, embraced it.