By Fawn Johnson Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- U.S. Securities and Exchange Commission Chairman Mary Schapiro on Tuesday told Wall Street's largest trade association that her agency will look more closely at high-frequency traders and a practice known as "sponsored access" in which brokers give their traders direct access to exchanges.
Speaking before the Securities Industry and Financial Markets Association, Schapiro also said that all people giving investment advice should be subjected to a high standard of conduct regardless of whether they carry the label of investment advisor or broker-dealer, according to the prepared text of her speech.
Schapiro said SEC staff is drafting a proposal on sponsored access.
"I liken it to giving your car keys to a friend who doesn't have a license and letting him drive unaccompanied," Schapiro said. "The reason this raises concerns is that broker-dealers perform vital gatekeeper functions--functions that are essential to maintaining the integrity of the markets."
Schapiro also has asked SEC staff to propose ways the agency can collect more information about high frequency traders, noting that lightning speed trading now represents more than 50% of trading volume.
"I believe we need a deeper understanding of the strategies and activities of high frequency traders and the potential impact on our markets and investors of so many transactions occurring so quickly," Schapiro said.
Schapiro's comments on investment advisors come the same day the House Financial Services Committee is set to begin considering legislation that would create a harmonized fiduciary standard for stockbrokers and advisers who offer financial advice.
Schapiro said "the standard of conduct that should apply must not be a watered-down, 'fair and reasonable commercial standard.' Instead it should be the type of standard that applies to a relationship of trust and confidence."
Schapiro's comment responds directly to fears of some within the investment community that Wall Street will try to weaken the current fiduciary standard to which investment advisors are held during the harmonization process. Broker-dealers who may give investment advice are subject to a less stringent "suitability" standard.
Advocates for a harmonized standard say individual investors often don't know whether they are talking to a registered investment advisor or a broker-dealer who also can offer investment tips.
SIFMA has endorsed a federal fiduciary standard for all financial professionals. The association hasn't spelled out what that standard should be beyond that it should be based on traditionally recognized fiduciary duties: put investors' interests first, act with prudence, don't mislead clients, provide clear disclosure, and avoid or appropriately manage conflicts.
-By Fawn Johnson, Dow Jones Newswires; 202-862-9263; fawn.johnson@dowjones.com
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Publié le 27 octobre 2009 Copyright © 2009 Dowjones