Trade associations clash over principal trades

Author: Danielle Myles | Published: 17 Apr 2012

Dueling comment letters from the US investment industry’s foremost trade associations have brought principal trades to the forefront of the long running debate on broker-dealer fiduciary obligations.
In-house brokerage counsel have called for a bigger picture analysis which goes beyond the current focus on semantics. A March 28 letter to the Securities and Exchange Commission (SEC) from seven investment advisor associations responds to, and disagrees with, points raised by Sifma in its July 2011 comment letter on the same topic.
Section 913 of Dodd-Frank mandated the SEC to study whether broker-dealers should be subject to a fiduciary standard "no less stringent than the standard applicable to investment advisers" under the Investment Advisors Act 1940 (the 40 Act) when providing personalised investment advice to retail customers. 
The SEC’s report last year recommended this change. And Sifma and the investment associations agree a uniform fiduciary standard is needed in this situation.
But they...