Introduction to Symposium: Revolution in the Regulation of Financial Advice: The U.S., the U.K. and Australia

(Excerpt) This Symposium brought together legal academics, practicing lawyers and business people to discuss new directions in the regulation of financial advice to retail investors. Recently, this has been the subject of many initiatives around the world. The Symposium examined three of these initiatives in the United States, the United Kingdom and Australia. In the U.S., the approach historically has been based on disclosure to manage conflicts of interest. Although the U.K. and Australia have not done away with disclosure, they have moved to banning certain practices, especially in the area of compensation to investment advisers from product providers that can result in conflicts of interest between an investment adviser and its clients

Legislature Mulls Change of Article 8

(Excerpt) A major revision of Article 8 of the Uniform Commercial Code was passed by the New York Assembly on July 2, 1996, but did not receive Senate consideration prior to adjustment. In light of the strong support given Proposed Article 8 by the banking and securities industries, the New York State Legislature will probably give serious consideration to passage when the next legislative session begins. Although the supporters of Proposed Article 8 have stoutly maintained that it is primarily a clarification of the existing Article 8 and that the proposed changes are insignificant, the proposal actually includes major changes that should be of concern to all investors in America’s securities markets. Without significant amendments to Proposed Article 8, investors would be profoundly disadvantaged

Do I Have a Bridge for You: Fiduciary Duties and Investment Advice

The debate about financial advice in the United States has taken a wrong turn. Instead of focusing on particular practices and the potential that these practices raise for conflicts of interest between advisers and their clients, the debate has focused recently on whether brokers, advisers to municipal and state issuers, and advisers to employee benefit plans regulated by ERISA should be held to a fiduciary duty standard. A fiduciary standard implies, in the words of Justice Cardozo, that “[a] trustee is held to something stricter that the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.” The thought is that brokers and ERISA advisers will be more attentive to their clients’ needs if such a fiduciary standard applies. Certainly, this is the basis upon which the Department of Labor is currently considering rules that apply fiduciary standards to ERISA advisers. This article argues that this reliance on fiduciary duties is misplaced. In part, this is because most fiduciary duties that arise with respect to financial advice can be modified by an agreement between the fiduciary and the beneficiary. There are procedural limits to ensure that a beneficiary has both the capacity and the information necessary to enter into a particular arrangement. But fiduciary duties turn out to be just a more punctilious version of contract law, with a few exceptions. This general contractual principle applies to both state fiduciary duties and to federal fiduciary duties that arise under statutes such as the Investment Advisers Act of 1940, the Investment Company Act of 1940 and ERISA

Reviewing Article 8’s Revised Collusion Standard

(Excerpt) The first published case to deal with the new collusion standard in revised Article 8 has been decided by Judge Bransten in Supreme Court, New York County. As New York City is the center of the securities industry, it is not surprising that the first published case to deal with collusion was decided here. The result reached by Judge Bransten, however, is surprising in the liberality with which collusion was construed

Introduction to Symposium: Revolution in the Regulation of Financial Advice: The U.S., the U.K. and Australia

(Excerpt) This Symposium brought together legal academics, practicing lawyers and business people to discuss new directions in the regulation of financial advice to retail investors. Recently, this has been the subject of many initiatives around the world. The Symposium examined three of these initiatives in the United States, the United Kingdom and Australia. In the U.S., the approach historically has been based on disclosure to manage conflicts of interest. Although the U.K. and Australia have not done away with disclosure, they have moved to banning certain practices, especially in the area of compensation to investment advisers from product providers that can result in conflicts of interest between an investment adviser and its clients