SEC panel votes to urge agency to strengthen advice rule proposal

SEC panel votes to urge agency to strengthen advice rule proposal
The Investor Advisory Committee suggests clarifying that Regulation Best Interest is a fiduciary standard.
NOV 07, 2018

A panel established to speak for ordinary investors to the Securities and Exchange Commission voted Wednesday to urge the agency to strengthen its investment advice reform proposal by putting tougher requirements on brokers. The SEC Investor Advisory Committee voted 16-3 to send the recommendations to the five SEC members as they work on crafting a final rule. SEC chairman Jay Clayton has not indicated when the final package will be released. The committee's eight-page recommendation calls for changes to the centerpiece of the SEC proposal — Regulation Best Interest, which is designed to raise advice standards for brokers. The committee calls on the SEC to clarify that the best interest obligation for brokers means they must recommend products and strategies they believe are the best available options for investors at the time the advice is given. The panel also said recommendations about account types and whether to roll over money from a 401(k) to an individual retirement account must be made in the best interests of the investor. In addition, it said the SEC should make explicit in its proposal that Regulation Best Interest is a fiduciary standard that would be uniform with the fiduciary requirement for investment advisers, but would vary in the way it is applied to brokers and advisers. "These are recommendations to enhance the proposal, not substitute a different approach," Barbara Roper, director of investor protection at the Consumer Federation of America and the principal author of the panel's proposal, said during a conference call of the group. She said that under the IAC's approach, the obligations attached to the fiduciary standard would "follow the contours of the relationship" that advisers and brokers have with their clients. "You'd see a standard that is flexible enough to apply to the variety of ways that advice and recommendations are offered to retail investors," Ms. Roper said. By forcing brokers to recommend the best available options to investors, the committee is trying to distinguish Regulation Best Interest from the suitability rule that now governs brokers. "We're seeking to sort of narrow the pool of recommendations that would satisfy best interest beyond those that satisfy suitability, not arrive at the perfect recommendation for an investor," Ms. Roper said. Mr. Clayton attended the meeting but didn't offer an immediate response to the recommendations. Sometimes the SEC incorporates IAC guidance into its rulemaking and sometimes ignores it. Some of the IAC members who voted to advance the recommendations noted they were opposed to some of the language. But the group agreed that a "significant majority" backed the document.

Latest News

'Bogged down' advisors just want to have fun (again)
'Bogged down' advisors just want to have fun (again)

Jim Cahn, of Wealth Enhancement Group, lifts the lid on his firm's partnership model, his views on RIA M&A, and the widely slept-on reason why advisors are merging into larger organizations.

Vestwell unveils new emergency savings account offering
Vestwell unveils new emergency savings account offering

The fintech firm is cementing its status in the workplace savings space with its latest ESA offering, which employers can integrate into their existing benefits package.

'Money Mimosas' and other ways to show your Valentine financial love
'Money Mimosas' and other ways to show your Valentine financial love

Wealth managers offer unique ideas for couples to grow closer emotionally and financially.

Limra research finds financial confidence on the rise among Black American workers
Limra research finds financial confidence on the rise among Black American workers

Survey findings suggest increased sense of financial security and more optimistic 2025 outlook, while highlighting employers' role in ensuring retirement readiness.

DOGE efforts sideswipe muni bonds backed by federal lease payments
DOGE efforts sideswipe muni bonds backed by federal lease payments

Falling prices for some securities within the $4 trillion state and local government debt market spotlight how the push to shrink spending is sending shockwaves across the US.

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.