Requiring Broker-Dealers to Disclose Conflicts of Interest: A Solution Protecting and Empowering Investors

Authors

Daniel P. Guernsey Jr.

Abstract

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) instructed the Securities and Exchange Commission (“SEC”) to analyze the gaps in the regulatory regimes of investment advisers and broker-dealers. After analyzing the differences between the two regimes, the SEC proposed a rule that essentially created a fiduciary duty for broker-dealers equivalent to that of investment advisers. In theory, a uniform fiduciary duty would increase investor protection; however, such a drastic overhaul of broker-dealer regulation has attendant consequences. Indeed, as seen from the federal government’s previous attempts to create a broker-dealer fiduciary duty, increasing broker-dealer regulatory requirements limits lower-capital investors’ access to investment services. This Note proposes that instead of a uniform fiduciary rule, the federal government should require broker-dealers to disclose their conflicts of interest. This would fill a gap present in investment adviser and broker-dealer regulation and increase investor protection by allowing investors to make better, more informed decisions.

Recommended Citation

Daniel P. Guernsey Jr., Requiring Broker-Dealers to Disclose Conflicts of Interest: A Solution Protecting and Empowering Investors, 73 U. Mia. L. Rev. 1029 (2019)
Available at: https://repository.law.miami.edu/umlr/vol73/iss3/9