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New York commercial litigator Daniel Kron, Esq - logo
FROM BOARDROOM TO COURTROOM, KRON TAKES CARE OF BUSINESS

Financial Protection Rollbacks Threaten Litigation

In November 2009, American Senator Chris Dodd proposed the Restoring American Financial Security Act. The bill required stock and insurance brokers to get registered as investment advisers with the SEC. The Senate version of the bill subjected brokers to the Investment Advisers Act of 1940.

Under Dodd’s legislation brokers were bound to owe a fiduciary duty to their clients and put their clients’ interest first.

Before Dodd, brokers only had to recommend investments which were ‘suitable.’ Brokers could recommend the fund which paid brokers the most in commission even though another investment opportunity may be better for their client.

Section 913 of the act imposed on brokers a fiduciary duty and eliminated the broker-dealer exclusion from the act. That exclusion exempted brokers from the requirement to register as an investment advisor.

The Act was prompted by the Bernie Madoff scandal which increased investor protections.

The Bad News

As reported in the New York Times, section 913 didn’t make it into the Senate bill overhauling financial legislation. Consumer and investor organizations supported keeping the stand for brokers even while insurance lobbyists opposed the imposition of standards on brokers.

On March 15, 2018, the U.S. Senate passed broad changes to the rules which were ratified in 2009 in reply to the financial crisis of 2008.

Idaho Senator Mike Crapo crafted legislation which is supported by Trump. The proposal provides relief to banks and regional lenders as regulations to sustain fiduciary responsibility are swept aside like used confetti.

Financial experts in the world’s economic marketplaces see the rollback as triggering another financial crisis.

Already, some Congressmen and Senators have threatened litigation to try to keep the financial train on the track.

© 2012 Daniel Kron, Esq., all rights reserved


New York commercial litigator Daniel Kron, Esq - logo

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