Broker best-interest contracts seen as arbitration game-changer

时间:2020-03-12 02:56:08 阅读:710489 官方地址:

(Reuters) - A U.S. Labor Department plan to require best-interest contracts from

retirement account brokers would make it easier for investors who try to recoup money for losses by pinning the blame on brokers’ bad advice, lawyers said. The contracts, which would require Wall Street brokers to pledge to uphold their clients’ best interests when giving retirement account advi

ce, are the signature piece of a long-awaited plan unveiled last week by U.S. Labor Secretary Tom Perez. He said the new rules would protect investors from recommendations that line brokers’ pockets with fees but fail to meet investors’ best financial needs. Securities industry experts are mulling the voluminous plan and the preparing their written views, due July 6. A public

hearing will follow. One potential impact of the proposal is becoming clear: Arbitration cases by investors who believe brokers misguided them about rolling over a 401(k) to an

IRA, or about other retirement advice, would be easier to prove, lawyers said. The Labor Department’s plan results from its roughly 5-year-long effort to craft a rule that would hold brokers who offer retirement account advice to a higher “fiduciary standard of putting customers’ in

terests first. Brokers must presently recommend investments that are “suitable for investors, based on factors such as age. “It’s a good step in the right direction, said Joe Peiffer, president of the Public Investors Arbitration Bar Association (PIABA), whose members are lawyers who represent investors. Contracts would clearly state brokers’ fiduciary responsibilities, at least for retirement advice. Individual investors could enforce those contracts in the arbitration unit run by Wall Street’s self-regulator, the Financial Industry Regulatory Authority (FINRA). Arbitrators currently rely on state laws when determining the standard of conduct that brokers must follow, a first step in any investors’ case. Only a handful of states, including California and Missouri, require brokers to act as fid

uciaries at all times, Peiffer said. A fiduciary duty that is set in stone would deflate arguments that brokerages typically raise to deflect blame for bad advice, such as that an investor has in-depth financial know-how, Peiffer said. Firms could be found to have run afoul of a fiduciary standard by simply selling mutual funds that charge upfront fees, when equiva小马哥论坛开奖现场 lent no-fee alternatives are available, lawyers said. Concerns about bigger legal liabilities for Wall Street are growing. “It makes the burden of defense all that more difficult, said Steven Rabitz, a New York lawyer who advises firms on retirement plan regulation. Among the issues: Investors’ lawyers will ramp up efforts to find more retirement account cases, said Larry Polk, an arbitration lawyer in Atlanta who represents brokerages. Retirement accounts are now at issue in less than a quarter of Polk’s cases, but that could change. Class action cases are another worry, said Jaret Seiberg, a Guggenheim Partners policy analyst. Peiffer, the investors’ lawyer, has no sympathy, saying conflicted advice now costs investors $17 billion a year. “I’ll be happy if a never see another 65-year-old man break down in my office because he’s wiped out, he said. (The story was refiled to restore the headline tag)