(Adds details on “say on pay” provision, industry comment)
WASHINGTON, June 24 (Reuters) - U.S. lawmakers agreed on Thursday to give the Securities and Exchange Commission authority to impose fiduciary duties on broker-dealers who provide financial advice.
Lawmakers hashing out a financial regulation bill said the SEC would get this authority after conducting a six-month study on the issue.
The House and Senate initially disagreed on whether brokers should adhere to the higher fiduciary standard, which requires investment advisers to put their clients’ interests first.
Under the legislation, the SEC would first have to evaluate whether the average investor is sufficiently protected by rules governing investment advisers and broker dealers.
If the SEC determines that a higher standard of care is needed, the regulator would have the authority to adopt such rules and would also have to take into account the findings of its study.
Brokers now must ensure only that a financial product is suitable for a client.
The brokerage industry supports the creation of a new fiduciary standard that would apply to all financial advisers and brokers, whether they work at a large brokerage firm or in smaller independent firms.
However, the industry does not want the existing fiduciary standard for investment advisers extended to all brokers.
Morgan Stanley MS.N spokesman Jim Wiggins said the firm is concerned that this standard would prevent the firm's advisers and brokers from offering certain products to clients, such as initial public offerings underwritten by the firm, as the standard restricts advisers from selling proprietary products.
Morgan Stanley and the brokerage industry want to see a new fiduciary standard drafted that would continue to allow these activities.
House and Senate negotiators also agreed to water down a provision that would have given shareholders an annual nonbinding vote on their companies’ executive pay.
Under a provision by Republican Senator Mike Crapo, companies will now ask shareholders whether they want to vote on executive pay annually, once every two years or once every three years.
The fiduciary duty and “say on pay” provision will be included in the final regulation bill that Democratic lawmakers hope to send to President Barack Obama to sign into law by early July.
Lawmakers also sought to determine whether to give shareholders an easier way to nominate corporate board directors. Shareholders can nominate directors by waging a proxy fight, but they contend this is costly and burdensome. (Reporting by Kim Dixon, Rachelle Younglai in Washington and Helen Kearney in New York; Editing by Kenneth Barry)
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