Mourning the Passing of the 40 Act

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Click here to listen to a podcast commemorating the 80th anniversary of the 40 Act and the future of the fiduciary standard, featuring Knut Rostad, Ron Rhoades and Jim Allen.

This year is already in the history books: the worst pandemic in a century; the largest protests and riots for racial justice since 1968; the most divisive presidential election since … who knows; and the passing of the civil rights fighter, Congressman John Lewis, which stirred the nation.

Little wonder, then, that 2020 has been a well-kept secret as the most significant year since 1940 for investor protection and federal regulation of securities. In 1940 the Investment Advisers Act (40 Act) was enacted. This year it’s been effectively repealed.

But its passing has gone unnoticed.

In the long shadow of the market crash and severe depression, the 40 Act was the equivalent of investors’ civil rights legislation.

It articulated an unambiguous clarity, vision and national purpose around what investors should expect from investment advice. It reflected FDR’s moral vision that the securities industry needed a “simple code of ethics.”