Banks and congress say no to being a fiduciary

When financial reform legislation finally lands on the Senate floor, a provision that advocates call the single most important item for Main Street investors will probably have been banished from the ponderous bill. That provision -- a requirement for stock brokers and insurance agents to act in the best interest of their clients -- was part of a 1,100-page draft bill unveiled by Senate banking... [more]

When financial reform legislation finally lands on the Senate floor, a provision that advocates call the single most important item for Main Street investors will probably have been banished from the ponderous bill. That provision -- a requirement for stock brokers and insurance agents to act in the best interest of their clients -- was part of a 1,100-page draft bill unveiled by Senate banking committee Chairman Christopher J. Dodd (D-Conn.) in November. Since then, industry and consumer groups have quietly lobbied members on the issue, even as much of the public debate has focused on oversight of big banks and the creation of a consumer protection agency. And now, with key senators wrangling over an agreement, the provision is widely expected to be replaced with legislative language directing the Securities and Exchange Commission to study the varying rules that govern brokers and registered investment advisers today, according to industry officials and legislative aides involved in the process. Investor advocacy organizations worry that such a move -- backed by Sens. Tim Johnson, a centrist Democrat from South Dakota, and Mike Crapo, an Idaho Republican -- would diminish chances of meaningful reform and vowed to keep fighting. "It happens to be the single most important provision in the legislation to enhance protection for average investors," said Barbara Roper, director of investor protection for the Consumer Federation of America. "It's not done until the bill is finally written. . . . Operating against us is the fact that this is not number one on any of these members' list of priorities, and with everything to be negotiated, it could easily become a trading chip." [less]