Wall Streets Ongoing Efforts to Avoid Fiduciary Standard Are Now Absurd

The self-interested behavior of Wall Street was fully exposed a decade ago by the greatest financial crisis in the last 50 years. Specifically, one of the core realizations that came out of this crisis was the fact that the business model of Wall Street was not aligned with the best interest of retail investors. As a result, the self-regulatory organization funded by the securities industry (FINRA) acknowledged that a fiduciary standard should be instituted for brokerage firms and licensed stockbrokers in its 2009 Year-End Report. Even industry organizations aligned with Wall Street and the brokerage industry – such as SIFMA (Securities Industry Financial Markets Association)– acknowledged the need for an across the board fiduciary rule in the wake of the financial crisis.

Based on the foregoing, it amazed us that a universal fiduciary standard was not immediately adopted for the securities industry. Finally, several years after the financial crisis, we were led to believe that the SEC had decided to act and push for a universal fiduciary duty in the securities industry. See this article from 2011 where our reaction is quoted.

In the above article, which is now almost 8 years old, we “expressed praise for Friday’s late SEC recommendation to Congress on needed reform to hold stockbrokers and registered investment advisors to a uniform fiduciary duty to their clients”, though we noted that we were “troubled that it took the devastating losses that retail investors had to suffer over the last several years during the economic crisis for these changes to come about, but regulators are finally stepping up to fix this glaring problem.”

Despite the foregoing article praising the SEC eight years ago, the SEC never acted to protect investors on this issue and, similarly, lawmakers have failed to independently act on this issue despite blaming Wall Street for the financial crisis every day in the news and in hearings as the 2008 financial crisis unfolded.


Lawyers, Doctors, and CPA’s take it as a given that they have a duty to act in the best interest of their clients and patients. Likewise, the clients and patients of the Lawyers, Doctors, and CPA’s take it as a given that these professions have a duty to act in their best interests. This is commonly referred to as a professional having a fiduciary duty to his or her clients/patients. When you see, hear, or read an advertisement from a Wall Street firm, you find that they use words like “trust”, “trusted”, “trustworthy” to create the belief that they have a similar fiduciary duty to their clients. However, even more, troubling than the clarity the financial crisis brought to the fact that Wall Street is not trustworthy, was the response by Wall Street that it is not held to the higher fiduciary standard required of other professionals or even registered investment advisors in the same industry.

Essentially, the financial crisis highlighted that much of the securities industry is fraught with conflicts of interest, including the push to sell “in house” products and strategies to unsuspecting investors who think they are getting independent financial advice. In recent years, these “in house” products have included structured notes, internally run funds, and even packaged products related to mortgages.


As mentioned above, lawmakers and regulators failed to act on the fiduciary duty issue in 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, and 2018. As a result, earlier this year, the securities industry organization that regulates CFPs (Certified Financial Planners) announced an intent to step up and apply a universal fiduciary obligation to all CFPs whenever providing financial advice. This new rule will require each CFP to, among other things, act in the client’s best interests. Financial institutions like UBS, Morgan Stanley, and Ameriprise Financial, after failing for a full decade to support fixing what we believe to be their broken system of putting Wall Street’s interest above investors’ best interest, actually urged the CFP to not enact this rule. We find this behavior by Wall Street, after a ten-year delay, to be absurd. In fact, we believe retail investors should completely avoid working with any securities firm that is opposed to a fiduciary rule that applies to every aspect of the financial advice provided by the firm to the customer.

Not only has Wall Street failed to act to protect its own clients, Wall Street has actually undermined efforts to protect investors. For example, Wall Street’s purported reason for not supporting the CFP’s recent move towards a blanket fiduciary rule is that it is the SEC’s responsibility (and not the CFP® Board) to come up with a unified fiduciary standard. See our article earlier this year on this issue, we highlighted how this argument by Wall Street is a sham. Specifically, we highlighted how Wall Street is (and has been for the last 10 years) deceptively working behind the scenes to actively lobby and interfere in the development of the fiduciary rule by the SEC or lawmakers.

Based on the foregoing, it was incredible to read earlier this month that the securities industry is still working to avoid an obligation to actually act in the best interests of investors. Specifically, this month, both Advisor Hub and Investment News reported that SIFMA – the self-described “voice of the securities industry” – is now trying to block individual states from implementing fiduciary standards to protect its citizens in light of the fact that federal regulators, federal lawmakers, and the securities industry have failed to act a decade after the financial crisis.

We believe that Wall Street and SIFMA, the “voice” of the securities industry, are completely void of credibility on this issue after a decade of not only failing to act, but also undermining efforts to enact a universal fiduciary rule. Moreover, at this late stage, Wall Street should not have a “voice” on crafting a fiduciary rule or crafting the implementation and enforcement of the rule. The securities industry has consistently shown that it is working for it’s own best interests and not in the best interests of the investor. As a result, we are confident that the bigger the “voice” of Wall Street on crafting a fiduciary standard, the more watered down any fiduciary rule and implementation will be. In the meantime, we applaud the states and the CFP Board for acting now and essentially saying a decade is a long enough time to patiently wait for federal regulators and federal lawmakers to fend off Wall Street lobbyists and fix the problem.


Vernon Litigation Group is a team of financial litigators that represent clients in courtroom litigation, arbitration, and negotiations throughout the United States. Our lawyers represent investors in federal court, state court, mediation, and arbitration (including FINRA, JAMS, and AAA arbitration). For more information, visit our website at or contact Vernon Litigation Group by phone at (239) 319-4434 or by e-mail at