SEC to meet to consider advice-standards proposal

Regulator to meet April 18 to consider three-part plan that includes disclosure document, broker standard, adviser-standard interpretation

Apr 12, 2018 @ 8:00 am

By Mark Schoeff Jr.

The Securities and and Exchange Commission next week will consider a proposal to establish a new investment-advice rule for brokers.

The April 18 meeting will involve consideration of a three-part proposal, according to a notice posted on the SEC website Wednesday night. The five-member commission is set to vote on a disclosure document for registered investment advisers and brokers that summarizes their relationship with investors; a rule that sets a broker advice standard; and an "interpretation of the standard of conduct for investment advisers."

The SEC is poised to revise investment-advice rules for the first time since it was given the authority to do so in 2010 under a provision of the Dodd-Frank financial reform law. The agency has not acted due to deep divisions over the years between commissioners on how to proceed.

If the SEC advances a proposal, it will help the agency catch up with the Labor Department, which promulgated its own fiduciary rule in 2016 for financial advisers to retirement accounts. That measure was partially implemented last summer. The enforcement provisions of the regulation have been delayed until July 2019, while the agency reviews the rule under a directive from President Donald J. Trump that could lead to major changes.

The fate of the DOL regulation also is in limbo due to a recent court ruling. The Fifth Circuit Court of Appeals vacated the rule in a split vote on March 15. The DOL has not yet indicated whether it will continue to defend the measure. The agency has until April 30 to ask for an rehearing before the entire 5th Circuit and until June 13 to appeal to the Supreme Court.

(MORE: Stay on top of all the latest developments in the fiduciary debate.)

The SEC and DOL have vowed to work together to set an advice standard. The DOL rule requires brokers to act in the best interests of their clients in retirement accounts.

Industry opponents say the DOL rule is too complex and costly and will make investment advice more expensive for ordinary investors. Advocates for the DOL rule say that it mitigates broker conflicts of interest that result in the sale of inappropriate high-fee products that erode retirement savings.

Critics of the DOL rule have called for the SEC to take the lead on investment-advice policy. It could do so next week for the first time in eight years.

Investment advisers currently must meet a fiduciary standard and act in the best interests of clients when providing retail investment advice. Brokers adhere to a suitability standard that requires them to sell products that meet a client's investment objectives and risk tolerance but also allows brokers to recommend products that produce the most revenue for themselves.


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