WASHINGTON -- As regulators, trade groups and investor advocates continue to spar over what rules should apply to brokers and advisors serving retail investors, the shorthand for that debate -- the uniform fiduciary standard -- might miss the point, a former top SEC official argues.

In a panel discussion at TD Ameritrade Institutional's Fiduciary Leadership Summit, Robert Plaze, a partner at Stroock & Stroock & Lavan who previously served as deputy director of the SEC's Division of Investment Management, called for a reframing of the debate, suggesting that the commission abandon the prospect of writing an identical regulatory framework for broker-dealers and RIAs.

'DEEPLY FLAWED'

"The uniformity of a uniform fiduciary duty is deeply flawed, both in idea and in how it will be implemented," Plaze says. "Everybody can agree with that, but everybody has their own idea of what that uniform fiduciary duty can be."

For instance, the biggest trade group representing the brokerage industry, SIFMA, has thrown its weight behind a uniform fiduciary standard. Advocates in organizations like the Consumer Federation of America and the Investment Adviser Association have been pressing the issue for years.

But those groups differ sharply in their vision of what, exactly, a uniform fiduciary standard should look like, with the advocacy camp calling for rules for brokers that would be no less stringent than those governing RIAs under the Investment Advisers Act.

'EXACT PARITY'

Groups representing brokers, meanwhile, have maintained that their industry needs to be given a measure of flexibility to conduct activities that wouldn't be permitted under the RIA fiduciary standard.

That's why Plaze recommends writing a narrowly tailored set of rules that would strengthen the code of conduct for brokers to impose a requirement that they act in the best interest of their clients, while still permitting some of the conflicts inherent to the business.

"There will not be exact parity between broker-dealers and advisors, but you will get to a more harmonious place, any effort to put broker-dealers and advisors into the same box is probably not going to work and going to lead to a number of problems," Plaze says.

The SEC has been considering whether to harmonize the fiduciary rules to cover advisors and brokers, warning that investors are confused about the different standards of care to which their financial professionals must adhere. Chairman Mary Jo White has often spoken of the need to address investor confusion, particularly as brokers increasingly advertise themselves as "advisors," but others in the commission have suggested that rule could do more harm than good.

CONTENTIOUS DEBATE

Former SEC Commissioner Troy Paredes recalls the contentious debate from his time at the agency.

"It's proven to be a challenge for the commission to reach some sort of consensus for how to proceed," Paredes says. "There are widely divergent views as to whether there's a problem, as to what the commission should do, as to what the potential tradeoffs and consequences are of pursuing different paths or sticking with the status quo."

Paredes, who left the government in 2013, remains a skeptic about whether any fiduciary rulemaking is necessary, arguing that the commission has yet to demonstrate the merit of writing new rules with a rigorous cost-benefit analysis.

Kenneth Corbin is a Financial Planning contributing writer in Washington.

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