MEDIA RELEASE

U.S. Sens. Daniel K. Akaka (D-Hawaii) and Robert Menendez (D-New Jersey) called for quick action to protect Americans when they receive investment advice, following the release of a new study by the staff of the U.S. Securities and Exchange Commission examining the obligations of brokers and investment advisers.

The SEC staff study, commissioned by Akaka and Menendez last year through the Dodd-Frank Wall Street Reform and Consumer Protection Act, recommends the creation of a uniform fiduciary standard that would require all financial professionals to act in the best interests of investors when giving personalized investment advice.

Akaka said: “It is simply unacceptable that investors are vulnerable to harm because brokers are not required to act in their best interests. Americans rely on their investments for their financial security, and they should be better protected when they are receiving investment advice. This study shows again that improvements are critically needed to protect ordinary investors and consumers when they receive investment advice. We must implement the study’s recommendations and establish a uniform fiduciary standard for brokers and investment advisers.”

Menendez said: “It is common sense that stockbrokers should have to act in your best interest when they give you investment advice such as stock recommendations. We must end the practice of allowing investment recommendations that are good for the broker’s fees, but bad for the customer. I am encouraged that the SEC has issued this valuable study taking us a step closer to implementing a uniform fiduciary duty standard for all financial professionals who give people investment advice.”

Investment advisers are legally bound by a fiduciary duty to act in the best interests of their clients and to place an investor’s interests before their own. In contrast, brokers are held to the lesser standard of suitability that has left investors vulnerable to conflicts of interest and questionable investment advice.

The SEC study determined that investors are largely unaware of distinctions in duties and obligations of different investment professionals.

In addition, the SEC staff recommended that the fiduciary standard for investment advisers be uniformly applied to brokers in their advisory interactions with investors.

Akaka and Menendez are members of the Senate Committee on Banking, Housing, and Urban Affairs and were lead Senate sponsors of The Honest Broker amendment, enacted as Section 913 of the financial reform law.

That provision was also cosponsored by Sen. Richard Durbin (D-Illinois) and supported by AARP, Americans for Financial Reform, Consumer Federation of America, Investors’ Working Group (Council of Institutional Investors), Investment Adviser Association, National Association of Secretaries of State, North American Securities Administrators Association, and the National Governors Association.

The full study is available through the SEC website: www.sec.gov/news/studies/2011/913studyfinal.pdf