New York City Comptroller Scott Stringer is tired of waiting on the SEC to create a uniformed fiduciary standard for advisors.

While the federal agency seems to finally be gaining traction on the fiduciary issue after years of on-and-off debate, Stringer has announced his own proposal that would require all financial advisors working in New York State to disclose “in plain language” whether or not they operate under a fiduciary standard, according to a press release.

The proposed disclosure would read:

I am not a fiduciary. Therefore, I am not required to act in your best interests, and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks, and expected returns for you.

“Billions of dollars in savings are lost each year because of hidden fees and conflicted financial advice,” Stringer said in a press release. “We need a uniform, national fiduciary standard, but we can’t wait to give New Yorkers the common sense reforms they need to make informed investment choices.”


While the debate over a fiduciary standard and disclosure isn’t new, Stringer’s proposal raises the question of the role individual states can play with regard to regulating advisors.

“In lieu of a national standard, states should take action to ensure that brokers are classified as fiduciary,” said Joseph C. Peiffer, president of investor advocate group PIABA. “But I don't think disclosure is the answer. I think duty is the answer.”

Still, others worry that Stringer may not be setting the best precedent. Christine Lazaro, director of the securities arbitration clinic at St. John's University, fears that state-by-state regulation will still leave clients vulnerable.

“It's important that all investors across the country are protected,” she said. “The problem with piecemeal protection is that it is great for individuals in those states but it will still leave other investors unprotected.”
One fear is that states would complicate the issue of creating a unified fiduciary standard by coming up with separate pieces of legislation.

“If you are trying to best protect investors then the SEC approach is the optimal solution,” said Kevin Zambrowicz, SIFMA general counsel and managing director. “We certainly don't need 50 state bills trying to reach the same manner.”

However, others believe that the states maintain the responsibility to protect their citizens regardless of what the federal government or SEC is doing.

“When it’s so clear that the federal government is not willing or able to do [something] the state should absolutely step in,” said Knut A. Rostad, president of the Institute for the Fiduciary Standard. “Those states that are active and aggressive have a far larger impact within their boundaries.”


While the SEC is clearly working on a uniformed fiduciary standard, Stringer believes that it won’t come soon enough.

“Unless the SEC moves quickly, it is likely that regulations would not be promulgated before the end of the Obama Administration, which may dim the prospects for reform,” he said. “Chairwoman White has indicated her personal support for reform. While that is welcome news, there has as of yet been no formal action by the SEC.”

In addition to the fear that the standard will take too long some believe that states should pass legislation because a new regulation by the SEC might not be stringent enough.

“I’ve got major concerns about what the SEC might do and is doing,” says Rostad. “There is zero reason for a local jurisdiction not to proceed with what they think is beneficial because the SEC might proceed.”


While Stringer has said he urges state legislators to create a bill and then pass it to create this fiduciary disclosure there is little else he can do. When asked which legislator would introduce the bill, Stringer said,

“We are engaging with our partners in the legislature and expect to have co-sponsors and bill language shortly.”

The bill, which is only a proposal at this time, would need to pass both the New York State Assembly and Senate to become a law. However, it doesn’t appear to be gaining much traction.
A spokesperson for the New York State Assembly said that the legislative body was not made aware of the proposal.

“We cannot comment on a proposal we have not seen,” said the spokesperson.

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