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Why We Should “Run” from the SEC’s Mary Schapiro
By Dr. David Edward Marcinko MBA CMP™
[Publisher-in-Chief]
OK, I’ve opined about fiduciary accountability for stock brokers, FAs and FPs – as well as Mary Schapiro [Chairman of the SEC] before – on this ME-P. And usually, in not so glowing terms!
But now, Mary really chaps my ethical and linguistic sensibilities.
Why I’m So P…… Off!
According to Bloomberg, and Advisor One [a financial services industry trade magazine], the chairwoman is considering something called the “business model neutral” rule that retains proprietary financial products, and brokerage sales commissions.
This concept of ‘business neutral’ is the one sought by many in the brokerage and insurance industry in order to redefine the term ‘fiduciary’ as an enhanced form of ‘suitability’ with opt-out provisions.
But, it is not sought by me, and should not be accepted by physicians.
Definitions
Suitability Rule – According to the Free Dictionary:
A stated or implied requirement by a regulatory body that a broker or investment adviser must reasonably believe that a certain investment decision will benefit a client before making a recommendation to him/her. That is, the broker or investment adviser must act in good faith, and may not knowingly recommend bad investments. Different regulators and self-regulating organizations incorporate suitable rules in different places in their bylaws. Two commonly referenced suitability rules are Rule 2310 for the Financial Industry Regulatory Authority and Rule 405 for the NYSE. See also: Due diligence, Prudent-person rule, Twisting.
Fiduciary Rule – According to the Free Dictionary:
A uniform standard for financial advisors that requires them to put retail customer interests ahead of their own financial interests.
This is clearly a higher duty [level of care] than suitability. Insurance agents, stock brokers, BDs and most “financial advisors” hate it.
Link: http://www.advisorone.com/2011/12/09/reaction-to-schapiro-comments-on-fiduciary-rule-ar?ref=hp
“Suitability on Steroids”
Some pundits suggest we think of this new “business model neutral” rule as “suitability on steroids.”
However, as most of us in medicine know, steroids are not a panacea and are typically used as a quick fix for short term gain, only.
Otherwise, the excessive use of anabolic steroids is bad for our physical health. Just like Mary Schapiro is bad for our fiscal health. But, a Certified Medical Planner™ is a fiduciary at all times http://www.CertifiedMedicalPlanner.org
More: Enter the CMPs
Assessment
And so, your thoughts and comments on this ME-P are appreciated. I was an insurance agent and certified financial planner for almost 15 years [Series 7, 63 and 65] before I resigned all – in disgust over the fiduciary flap.
Doctors are fiduciaries. I am a fiduciary, a doctor, and a financial advisor. Shouldn’t all physician-investors demand same from their own financial advisors [NASD-FINRA, RIAs, RIA-Reps]?
But hey – I’m just a medical provider.
Conclusion
Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.
Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com
OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:
- PRACTICES: www.BusinessofMedicalPractice.com
- HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
- CLINICS: http://www.crcpress.com/product/isbn/9781439879900
- ADVISORS: www.CertifiedMedicalPlanner.org
- FINANCE: Financial Planning for Physicians and Advisors
- INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
- Dictionary of Health Economics and Finance
- Dictionary of Health Information Technology and Security
- Dictionary of Health Insurance and Managed Care
Front Matter with Foreword by Jason Dyken MD MBA
[BY DOCTORS – FOR DOCTORS – PEER REVIEWED – NICHE FOCUSED]
***
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Filed under: CMP Program, Ethics, Glossary Terms, Investing, Op-Editorials | Tagged: certified financial planner, certified medical planner, CFP, CMP, david marcinko, fiduciary, financial advisors, FINRA, Mary Schapiro, NASD, RIA, suitability rule, www.certifiedmedicalplanner.com |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
Dr. Marcinko – I applaud you for your efforts in the fight to give consumers a level playing field in the financial advisory industry in this country. At times I am sure it must feel like being the “lone voice in the wilderness” when even the supervisory agencies don’t get it. You cannot be “kind of” a fiduciary anymore than you can be “kind of” pregnant. The lobby groups for the Insurance Gorillas and the Broker/Dealer Gorillas are powerful, as I have discovered since being FINRA and Insurance licensed since 1989.
I dropped my licenses in September 2010 to become a fiduciary financial planner. I have good friends in industry that are good at what they do, but are not fiduciaries. Having been the President and Chairman of the Financial Planning Association- Utah Chapter for the past 3 years, I have become acquainted with many good financial planners, financial advisors, and insurance sales people as FPA members. Only a few are fiduciaries, and it is so obvious to those of us in the business. Unfortunately, it is not obvious at all to the consumers. The Gorillas know this yet want to continue to muddy the waters with their “suitability” somehow being now morphed into “fiduciary.” Even they now believe their own press, as I have non-fiduciary associates in the business tell me “My fee-based business model is pretty much the same as yours.”
Pretty much, kind of makes me wince.
David K. Luke
Physician Financial Advisor
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SEC Issues Long Awaited Social Media Guidelines; Disciplines Adviser for Social Media Fraud
The SEC finally issued loose social media guidelines for investment advisers.
The regulator has long been criticized for its failure to create any kind of regulatory framework for firms and advisers who want to participate on sites like Facebook and LinkedIn, as many of them feel they need to establish a presence there.
Some investment advisers were happy to get a little direction from the regulator, but there are still plenty of gray areas.
http://registeredrep.com/advisorland/technology/sec_issues_long_awaited_social_media_guidelines_disciplines_adviser_for_social_media_fraud_0105/?NL=09-RGRa&Issue=09-RGRa_20120107_09-RGRa_885&YM_RID=marcinkoadvisors%40msn.com&YM_MID=1283596
And, most RRs are just product sales shills.
Burke
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To be … or not to be … a Fiduciary Advisor?
On his blog, Mike Kitces CFP™ asks: Is “advice vs product sales” a better distinction than “fiduciary vs suitability”? Does it make a clearer distinction for doctors and the public?
IOW: How can we shift advocacy, lobbying, and discussions with the public – if focused on the debate separating financial advice from financial product sales – instead of fiduciary accountability from suitability?
http://www.kitces.com/blog/archives/226-The-Public-Deserves-A-Choice,-But-Its-Not-Fiduciary-Vs-Suitability.html
So what do you think?
Dr. David Edward Marcinko MBA CMP™
http://www.CertifiedMedicalPlanner.com
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My Follow-up
At first glance, my original post might appear to be good news for stock brokers, financial advisors and planners, and registered reps selling securities and insurance products tied to securities through broker/dealers. But, the devil is in the details.
For example, will they be clear and concise? Or, will they be “loosy-goosy” and open the way for a multitude of lawsuits? Will they simply make provisions for commissions and proprietary products? Or, will they redefine “fiduciary” as “enhanced suitability” with opt-out provisions?
Will they incorporate the core of the fiduciary standard — putting clients’ interests first — and, if so, what if a competing product is better for a client than an advisor’s proprietary product?
As for me, I want them to be loosy-goosey so reps to have to “think”. If clear and concise, then the so called financial advisors are just product pushers following the technical rule of law; nothing more. Of coursed, that’s why they are called “registered reps”; they represent a company that sells a financial product for which they usually get pressured to sell with correspondingly higher commission checks. The standard should also be one of a fiduciary at all times, no-opt out provisions.
Sorry, but Mary is still on the side of the industry; not the client. That’s her job. She gets paid well for it. More than most doctors.
Dr. David Edward Marcinko MBA
[Editor-in-Chief]
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Wirehouses Minting Fiduciary Advisors – Or Are They?
In the past three years, Wall Street firms have ramped up fiduciary training for their financial advisors ahead of rules, and market trends, that may demand it. So why don’t they want us to know about it?
An tnteresting article by by Kristen French:
http://registeredrep.com/institutions/wirehouses_minting_fiduciary_advisors_315/?NL=RGR-06&Issue=RGR-06_20120321_RGR-06_792&YM_RID=marcinkoadvisors%40msn.com&YM_MID=1299558
Burton
Financial Advisor
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NAPFA’s New Chair Takes on FINRA
Ron Rhoades is not going to sugarcoat this – FINRA is a failed organization that has no business stepping into the role of regulating RIAs.
http://registeredrep.com/planner-ria-practice/napfas_new_chair_takes_on_finra_518/?NL=09-RGRa&Issue=09-RGRa_20120525_09-RGRa_677&YM_RID=marcinkoadvisors%40msn.com&YM_MID=1314888
That goes for the SEC, too. And, wasn’t Bernie Madoff chairm of FINRA / NASD at one time?
Ron
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Impotence
The SEC and FINRA are beholden to PAC and financial services industry money; Wall Street too, but not retail investors.
LeMay
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From the Compliance Field
The truth of the matter is that neither FINRA nor the SEC has done a good job regulatating the brokerage industry or advisory business.
Remember, Bernie Madoff, AIG, Lehman Brothers and the flash-crash of 2008? It is always buyer-beware; even for the little retail guys like physicians.
Dr. Boookstone
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Schapiro Drilled on Money Market Reform
Securities and Exchange Commission Chairman Mary Schapiro was in the hot seat last week during a US Senate Committee on Banking, Housing, and Urban Affairs hearing to discuss the controversial proposed money market fund reform.
http://wealthmanagement.com/blog/schapiro-drilled-money-market-reform?NL=WM-10&Issue=WM-10_20120622_WM-10_629&YM_RID=marcinkoadvisors%40msn.com&YM_MID=1320507
Any thoughts?
Dr. Hardy
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FINRA Reports $84 Million Loss for 2011
Higher operating costs, increases in employee compensation and losses in equity markets took their toll on the regulator’s books.
http://www.financial-planning.com/news/finra-reports-loss-2679678-1.html?ET=financialplanning:e8792:2248552a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=FP_Daily__070212
Samantha
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What Are FINRA’s Top Executives Earning?
Check out what FINRA’s top leaders and executives are making, according to the organization’s annual report.
http://www.financial-planning.com/gallery/ows/Top-FINRA-Executives-Salaries-Compensation-2679695-1.html?ET=financialplanning:e8803:2248552a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=fp_alert_070312
I wonder how much Bernie Madoff was paid when he was the Chairman of FINRA / NASD?
Ann Miller RN MHA
[Executive-Director]
http://www.CertifiedMedicalPlanner.org
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Ready or Not, Here Comes FINRA’s New Rules on Suitability
Dr. Marcinko – The time has finally arrived. FINRA’s new suitability and know-your-customer rules take effect today.
Rule 2111 expands broker-dealer suitability obligations in three important ways. First, the revised rule covers investment strategies and explicit recommendations to hold securities, adding to the old Rule 2310’s requirement for suitability analysis relating to recommendations of a purchase, sale or exchange.
Second, Rule 2111 adds to the necessary customer profile information that a broker-dealer is required to obtain.
Third, the rule enumerates three specific suitability evaluations as follows:
http://www.financial-planning.com/blogs/finra-new-rules-on-suitability-2679737-1.html?ET=financialplanning:e8851:2248552a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=fp_alert_070912
What do you think?
Chuck
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SEC’s Schapiro to Step Down
Securities and Exchange Commission Chair Mary L. Schapiro will step down on December 14th, 2012.
http://www.financial-planning.com/news/SEC-mary-Schapiro-to-Step-Down-2682001-1.html?ET=financialplanning:e12274:86235a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=fp_alert_112612
Yeah!
Saloma
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FINRA Clarifies Suitability Terms
The rule has been the most common ground for disciplinary action so far this year, according to this essay and an analysis by the law firm Sutherland Asbill & Brennan.
http://www.financial-planning.com/news/FINRA-Clarifies-Suitability-Terms-2682352-1.html?ET=financialplanning:e12392:86235a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=fp_alert_121112
Chuck
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FINRA Suitability Rule at Forefront of Group’s Reg Agenda
Alarmed at a set of conditions that could invite sales abuses and eventually a market correction, the Financial Industry Regulatory Authority enters 2013 with a warning to investment advisors that the group plans to keep a close eye on the industry and hold advisors accountable to its new suitability rule.
http://www.financial-planning.com/news/FINRA-Suitability-Rule-at-Forefront-of-Regulatory-Agenda-2682825-1.html?ET=financialplanning:e12652:86235a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=FP_Daily__011513
So, is this like the fox guarding the henhouse?
Rex
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The SEC
Obama picks Mary Jo White to lead Securities and Exchange Commission.
http://news.msn.com/politics/report-obama-picks-mary-jo-white-to-lead-securities-and-exchange-commission
Your thoughts?
Enoch
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Mark Cuban versus the SEC
The only way to reform what ails the Securities and Exchange Commission is to “burn it down and start again,” says Mark Cuban, billionaire entrepreneur, host of the television show “Shark Tank,” and the owner of the Dallas Mavericks.
http://wealthmanagement.com/blog/mark-cuban-vs-sec?NL=WM-10&Issue=WM-10_20141212_WM-10_844&sfvc4enews=42&cl=article_2&YM_RID=CPG09000002702210&YM_MID=1402
In this report he also said: “But Mary Schapiro (the former chair of the commission) doesn’t give a sh@#t,”
Dr. David Edward Marcinko MBA
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