Jay Facciolo
Professor Jay Facciolo has just published “Do I Have a Bridge for You: Fiduciary Duties and Financial Advice,” his latest article on securities regulation, in 17 University of Pennsylvania Journal of Business Law 101 (2014). The issue of whether broker-dealers should be held to a fiduciary standard as are investment advisers has generated a great deal of debate since 2010, when Dodd-Frank mandated that the SEC study the issue. Currently, the Department of Labor is considering proposing a new rule that would apply a theoretically strict fiduciary standard to financial professionals in the ERISA context. Professor Facciolo’s article argues that a fiduciary standard is no substitute for substantively regulating conflicts of interest in the provision of financial advice. Fiduciary standards fail to provide strong legal protections because of the contractual nature of such standards. In addition, standards are only as strong as the enforcement mechanisms available and, in financial advice, regulatory oversight has been ineffective and there are no robust private rights of action. Finally, disclosure, the standard fall back in securities regulation, has not worked well in creating limitations on conflicts that protect investors. In fact, some recent research has even suggested that disclosure of conflicts of interest may make investors trust their conflicted investment advisers more. After all, only a trust worthy individual would be willing to disclose something potentially negative about herself.
St. John's University Law Faculty Blog 