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(from Jane Bryant Quinn’s website, janebryantquinn.com, 6/25/2010 – read the article directly here)

Senator Tim Johnson socked investors with what might be a knockout punch, during negotiations on the financial reform bill. Investor protection is down for the count. The new law, when passed, is going to leave you out.

Johnson, a South Dakota Democrat, laughs at the concept of “fiduciary duty”—the idea that people who advise you on investments should to put your financial interests ahead of their own.

At present, registered Investment advisers have a fiduciary duty toward you and your money. But there’s an exception for stockbrokers and insurance agents. They can—and do—advise you to buy financial products that benefit themselves more than they benefit you.

For example, it’s okay for them to offer you high-cost mutual funds when low-cost funds are available that invest the same way. It’s okay for them to sell you a high-cost, out-of-state 529 college savings plan when your own state’s plan costs less and gives you a tax deduction, too.

The version of financial reform passed by the House of Representatives would have stopped all that. The House brought brokers and insurance agents under the fiduciary rules when they offer personal financial advice.

The bill passed by the Senate punted, by telling the Securities and Exchange Commission to study the issue. The House and Senate are now negotiating their differences.

Suddenly, out of the blue, Johnson swept in—not with a compromise, but with an even broader anti-investor proposal. When the SEC eventually does the study, limits will be put on its findings. It won’t be allowed to decide that brokers should be subject to the fiduciary rules unless there is virtually no other way of protecting investors from unscrupulous advice.

Barbara Roper, director of investor protection for the Consumer Federation of America, calls the provision a “poison pill.” It ensures that brokers can continue to violate your trust. The Senate negotiators passed Johnson’s proposal on a voice vote, without revealing the names of the Senators who supported it.

Johnson, known as the “senator from Citibank,” habitually sides with the financial industry and against consumers. He’s the only Democrat who opposed last year’s legislation to curb credit card abuses.

Next year, he’s in line to become the chair of the Senate Banking Committee. If that happens, you can kiss any further reforms good-bye. You can also expect his committee to be sympathetic to bills that roll current protections back.

At this writing, nothing is final. But the House will probably accept the Senate’s punt. Johnson’s aggressive language might be watered down, but brokers and insurance agents won’t have to change their ways anytime soon. Remember this, when they give you advice. You can’t trust them. They put their own interests first.