Senators Akaka, Menendez Introduce Honest Broker Amendment to Wall Street Reform Bill
Press Release
U.S. Senators Daniel K. Akaka (D-Hawaii) and Robert Menendez (D-New Jersey) offered an Honest Broker amendment to the Wall Street Reform bill to obligate financial professionals to act in the best interest of their clients by imposing fiduciary duty on brokers.
Senator Akaka said: "We have seen too many examples of brokers profiting from pushing higher commission inappropriate products. This amendment would bring accountability to brokers by creating a legal obligation to put their clients' well being before their own. Investors must know that their broker is acting in their best interests."
Senator Menendez said: "The saying goes 'The customer is always right,' not 'The customer is an afterthought.' The evidence from the Goldman Sachs case shows how some bankers have put their own interests ahead of their clients' trust. People don't invest their hard-earned money just to line the pockets of their stockbrokers. They should be able to invest with the peace of mind that they are dealing with trustworthy investment professionals."
Brokers currently have the same conflict of interest Goldman Sachs is accused of in its civil fraud case by the Securities and Exchange Commission (SEC): financial incentives to steer clients toward bad investment products that brokers make more money on. The amendment would require brokers to act in the best interests of their retail clients, require brokers to disclose conflicts of interest, and give the SEC discretion to apply a fiduciary duty standard for all types of investors including institutional investors who were allegedly victimized by Goldman Sachs.
The Honest Broker amendment is supported by AARP, Americans for Financial Reform, Consumer Federation of America, Investors' Working Group (Council of Institutional Investors), Investment Adviser Association, National Association of Secretaries of State, North American Securities Administrators Association, and the National Governors Association.
Senator Richard Durbin (D-Illinois) is a cosponsor of the amendment. Senators Akaka and Menendez are members of the Senate Committee on Banking, Housing, and Urban Affairs. The amendment was formally filed last night.
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