InvestmentNews reports on June 19, 2009, that effective securities regulation of financial advisers can not be based solely on fiduciary standards, Securities and Exchange Commission Chairman Mary Schapiro told the New York Financial Writers’ Association at its annual awards dinner last night. Fiduciary standards are “not a panacea to deter all fraud against individual investors,” Ms. Schapiro said in her prepared remarks.

She endorsed the regulatory reform proposal issued Wednesday by the Obama administration, which included a proposal to require that all financial advisers come under a fiduciary standard. Currently broker come under different regulations that require they make suitable recommendations to customers, while investment advisers are held to a fiduciary standard, meaning they must act in their client’s best interests. “Malevolent behavior still occurs, even by those who owe a fiduciary obligation to their clients,” Ms. Schapiro said.

Since she became chairman of the SEC in January, about a third of the 26 actions the agency has brought against Ponzi-type schemes involved investment advisory firms subject to fiduciary standards. “Thus, we can not build an effective regulatory regime around the fiduciary standard of conduct alone,” Ms. Schapiro said. “More needs to be done to effectively harmonize our regulatory structure for broker-dealers and investment advisers and meaningfully protect investors,” she said...