Published by Houston Securities Fraud Lawyers Shepherd Smith Edwards & Kantas

Posted On: November 11, 2014

Survey by FINRA Shows Investors Want More Regulatory Protections

According to a Financial Industry Regulatory Authority-released survey of investors, 92% of participants believe that there needs to be a regulatory “cop” to protect investors. 94% said that regulators should use the latest technology and tools on the job. The survey is intended to evaluate how investors feel about regulatory protections.

1,000 investors participated in the survey. Overall, said the self-regulatory organization, investors were in strong agreement that regulation and investor protections are key. The majority of investors also said that it is important that regulators detect when customers are sold unsuitable securities, if brokers are making trades to their benefit rather than that of investors, and when firms are taking risks that could hurt customers. 74% of those surveyed said they are in support of additional regulatory protections against broker misconduct.

The Survey was conducted over several days last month. Respondents came from a nationally distributed online panel. They had to meet certain criteria: U.S. citizen, at least 21 years of age, with primary or shared responsibility in their home for investment choices, and at least $10,000 in securities investments.

According to InvestmentNews. Securities and Exchange Commission Chairman Mary Jo White is preparing to disclose what she thinks is the best way for the regulator to enhance investment-advice standards for brokers. At the yearly Securities Industry and Financial Markets Association meeting this week, White said that the SEC has not yet decided on whether to enhance the standard of care.

It’s been over four years now that the SEC has been debating on whether to propose a rule that would create a uniform fiduciary duty for retail investment advice. Such a rule would obligate brokers to act in their clients’ best interests—much like the fiduciary duty of investment advisers to their clients.

The Dodd-Frank Act gave the Commission the authority to put forth new regulation about fiduciary duty. The opposition by two of its commission members to such a rule is just one of the reasons the regulator has not yet acted on this authority. There are five members on the SEC Commission.

Meantime, SIFMA, at the same conference where White spoke, has voiced its opposition to the re-release of a proposed Department of Labor regulation that would extend fiduciary duties to advisers who sell individual retirement accounts. The DOL has said the rule would protect investors from advisers that had conflicts of interest.

However, ex-SIFMA chairman Jim Rosenthal said that the rule would only let IRAs be held in managed accounts that charge investors fees according to assets under management, while curtailing having them offered in brokerage accounts that charge investors on a per trade transaction basis. He believes this will keep brokers from servicing accounts that are small.

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