The Securities and Exchange Commission will vote on an investment-advice reform package on June 5.
The agency posted the agenda for the open meeting on its website Thursday afternoon. The four SEC members will decide whether to adopt Regulation Best Interest, which is designed to raise the advice standard for brokers above the current suitability rule. They also will vote on a final client relationship disclosure document known as Form CRS.
The third of the four items says the commission will "consider whether to publish a commission interpretation of the standard of conduct for investment advisers." It's not clear how this is related to the interpretation of the Investment Advisers Act that the SEC proposed last year as part of the advice reform package.
The fourth item is new. It's labeled "Interpretation of 'Solely Incidental.'" This was not part of the advice reform proposal the SEC released in April 2018. It appears to address the language in the Investment Advisers Act that exempts brokers from registering as investment advisers if advice they give to clients is "solely incidental" to the recommendation to purchase an investment.
Whether broker advice is incidental to their relationship with a customer or at the center of it has been at the heart of a decades-long debate over investment advice standards. The brokerage industry has maintained that broker advice should not subject them to the fiduciary standard that governs investment advisers. Investor advocates say that brokers long ago crossed the line from "solely incidental" to something much more comprehensive and deserving of the fiduciary standard.
"That's the one unanticipated addition to the agenda," said Barbara Roper, director of investor protection at the Consumer Federation of America. "There are infinite possibilities there for the commission to make things even worse by adopting an anti-investor interpretation of 'solely incidental to.'"
Under the SEC advice reform package, brokers would be subject to Reg BI and investment advisers would continue to be fiduciaries. SEC Chairman Jay Clayton has said Reg BI is based on fiduciary principles and would provide investors with similar protections whether they use a broker or adviser.
The reform package proposal drew 6,000 comments.