The U.S. Securities and Exchange Commission, which has now closed its period of public comment on a universal fiduciary standard for broker-dealers, received a lengthy letter of opposition from the largest group of independent U.S. insurance agents.

"The increased burdens on financial providers and adverse consequences for consumers certainly outweigh any measurable accompanying benefits," Bob Rusbuldt. president and chief executive officer of the Independent Insurance Agents & Brokers of America, wrote in the letter to the SEC. He called the proposal "unwarranted" and said it would have "seismic repercussions" if such a standard were extended into the insurance world.

Certain life insurance agents namely securities licensed insurance agents and broker-dealer firms could face increased legal liability depending on how the SEC rules (BestWire, Aug. 16, 2010). While the Big I members deal largely with property/casualty business, Charles Symington, its senior vice president of government affairs, said that "a large number of our members do sell these products."

"At the end of the day, we believe it would be harmful to consumers -- particularly middle-class consumers," Symington said of the universal standard. "We believe our members provide a valuable service in counseling that level of consumer." He argued that middle-class customers may not be able to afford the expensive advice available to more affluent people if the main-street Big I members "decide that they'll no longer offer this type of service to clients."

Under the Dodd-Frank Act, the SEC has been called on to study the legal standards of care for broker-dealers and investment advisers when providing investment advice about securities to individual investors. Investment advisers are held to a fiduciary standard, meaning they must put the interest of their clients before their own, whereas a broker-dealer must observe standards that include an obligation to make recommendations that are suitable for their clients, according to SEC Chairwoman Mary L. Schapiro (BestWire, Aug. 16, 2010).

This week's letter to the SEC contended that "identifying the ideal product among many different alternatives is not as simplistic, straightforward, and clear-cut as some mistakenly believe. Any such determination is inherently subjective." Establishing "an amorphous and subjective standard" could "reduce the universe of qualified professionals willing to offer knowledgeable assistance and investment services," Rusbuldt wrote.

(Jesse A. Hamilton, Washington bureau manager: Jesse.Hamilton@ambest.com)