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Testimony of Ron Rhoades at DOL Hearing on Proposed Conflict of Interest Regs

"The huge extraction of rents by Wall Street and the insurance companies must stop. The size of the financial services sector, relative to the overall U.S. economy, has grown from under 3% in 1950 to well over 30%, and perhaps even 40%, today.... Due to conflicts of interest, many individual investors have not accumulated enough for retirement. As a result, the burden upon federal, state and local governments to provide for our retired citizens increases.... The fiduciary standard is a much-needed correction to the current unworkable system for the provision of retirement advice. The suitability standard, on the other hand, is not the answer."

A Simple Solution to Fiduciary Rulemaking at the SEC

"There is a simple, elegant solution. It is found in state common law, which serves to inform federal common law. The SEC can merely adopt the following rule: 'Any registered representative of a broker-dealer, and its firm, become a fiduciary to its customer when a relationship of trust and confidence is formed.' After promulgating this simple statement, the SEC could let the courts determine when a relationship of trust and confidence arises. There is already a body of common law around this issue. Of course, further guidance will likely be needed from the SEC, over time, to ensure that fiduciary obligations are not attempted to be circumscribed by the actions of broker-dealers."

Lipstick on a Pig and Reg BI: The SEC Aids and Abets Fraud

"In the language of Release the SEC talks of broker-dealers possessing a new standard of conduct that requires them to 'act in the best interests of the retail customer at the time a recommendation is made without placing the financial or other interest of the broker-dealer or natural person who is an associated person making the recommendation against the retail customer.' But the language of the proposed Regulation itself -- which is what matters -- falls far short of such a standard."

A Call to Action on the DOL Conflict of Interest Rule

"Wall Street and the insurance companies are pouring hundreds of millions of dollars at lobbying efforts, and misleading television ads, to stop this very important development. Permit me to share some stories, and some thoughts [on these points:]... The 'suitability' of a replacement annuity.... The plan sponsor: hung out to dry.... The retiree and the illiquid, mis-valued non-publicly traded REIT.... The call center employee, the inappropriate IRA rollover, and the new retiree.... The retiree, the IRA, and the variable annuity.... Economic incentives matter, and they matter a great deal.... The necessity of the fiduciary standard for providers of investment advice."

Transforming the Financial Firm from a Sales Culture to a Fiduciary Culture

"To get it done right, a fiduciary culture must be embraced fully by the principals of the firm. The fiduciary duties must be understood. Many systems of the firm, from investment strategy selection, to investment product due diligence, to client intake processes, to documentation needs, and much more, must be re-designed. The fiduciary culture must then filter down to everyone in the firm through robust education and values leadership."

Wall Street's Whipping Boy and a World Without a Fiduciary Standard

"Congress and the government agencies are visited by anti-fiduciary advocates more than 20 times the visits seen by pro-fiduciary advocates. Wall Street's investment banks have committed to each other to spend hundreds of millions of dollars, if that is what it takes, to defeat the application of the fiduciary standard to the investment advisory activities of broker-dealers. If the SEC ever acts on the authority granted it under Section 913 of Dodd Frank ... the fiduciary standard for all who deliver investment advice will be lowered to 'suitability plus a bit more disclosure.'"

The SEC's Failures, the Fiduciary Standard, and the Role of a Fiduciary Oath for Consumers and Professionals

"Integrity. Trust. Fiduciary. These words have, throughout history, possessed meaning. As applied to financial and investment advisors, these words define whom advisors might be, the confidence placed in advisors by their clients, and the status as a loyal, candid and honest servant, expert, and steward.... Dilution has occurred to such an extent that the very core of the concepts expressed by these words -- the ability to trust one's advisor -- is eviscerated, leaving nothing but an empty shell. This empty vessel exists today, as a result of the failure to apply and enforce bona fide fiduciary standards under the Investment Advisers Act of 1940 by the [SEC] over the past few decades."

A Proposed Set of Professional Standards of Conduct for the Delivery of Personalized Investment Advice

"[T]he lobbyists of Wall Street firms and insurance companies, and the hired law firms of large BD firms and insurance companies, are now extensively arguing that, should fiduciary duties be applied to brokers, only 'disclosure' of a conflict of interest is required. To that [the author] would say ... nonsense.... The fiduciary duty of loyalty is not met simply by disclosure of a conflict of interest; much more is required."

How to Choose an Investment Advisor: A Checklist for Consumers

The author presents a list of questions and accompanying discussion, including: "Are you a fiduciary under the law, and will you continue to be my fiduciary at all times during the advisor-client relationship we will enter into? ... Can 'financial planning' advice be separated out from your 'investment advisory' services? ... What conflicts of interest do you, your firms, or any affiliated firms possess with respect to the advice you may provide to me? Do you or your firm receive any material third-party compensation when I choose your investment advisory services or invest in investment or insurance products recommended by you?"

FINRA's Failure: It Is Not a 'Professional Regulatory Organization'

"Why is a true Professional Regulatory Organization for financial planners and investment advisers important as a long-term goal? By maintaining and enhancing the professional standards of its members over time, the services of its members become more attractive to the public, fueling demand for the services of its members. The standards that are adopted must serve the public interest."