Investment Recommendations and the Essence of Duty

Abstract:     
I recommend that federal bank, commodity, and securities regulators jointly modify the manner in which financial intermediaries market investment transactions in order to provide investors with quantitative information that facilitates comparison across products and understanding of risk. On its face, the Dodd-Frank Act does little to address the balkanization of business conduct standards but continues Congress’s policy of classifying the obligations of financial services providers by regulatory category (e.g., “securities,” “derivatives,” “banking,” “consumer finance”). To the extent that opponents of harmonization dwell on the talismanic significance of words such as “fiduciary,” “suitability,” and “duty of care,” I propose a safe harbor that distills the essence of a fiduciary’s obligations to permit consistent application across all financial services products.

Number of Pages in PDF File: 74

Accepted Paper Series