SEC advises brokers and investment advisers to put the interests of retail investors first

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Overview of the SEC’s Standards of Conduct for Investment Advisors Staff Bulletin:

  • WHO: The United States Securities and Exchange Commission (SEC) has issued a staff bulletin for broker-dealers and investment advisers.
  • Why: The SEC Bulletin issued new guidance for brokers and investment advisers advising them to put the interests of retail investors first when recommending accounts.
  • Or: The staff newsletter is relevant for financial advisors nationwide.

The U.S. Securities and Exchange Commission (SEC) has issued a staff bulletin for broker-dealers and investment advisers, advising them to put the interests of retail clients first when recommending accounts.

The SEC noted in its guidance, which was issued as a staff newsletterthat while standards of conduct differ in some respects between industry players, overall they are all drawn from “key fiduciary principles which include the obligation to act in the best interest of the retail investor “.

Changes either to the Best Interest Regulation rule or the Investment Advisors Act were not suggested in the new SEC guidelines.

The Best Interest regulation, also known as Reg BI, was approved by a Republican majority on the committee in 2019 and has been criticized by Democrats for not explicitly defining what exactly “best interest” is. of an investor, reports Law360.

The idea behind Reg BI is that it sets an industry standard for brokers to get in step with investment advisors, while not holding the former to an established fiduciary standard.

SEC says retail investors will often rely on financial advisers

The bulletin specifically addressed the importance of account screening for retail investors who, according to SEC Chairman Gary Gensler, often rely on advisers to help them make decisions.

“Many (retail investors) rely on brokers and investment advisors to help them choose investments, strategies and accounts to achieve their goals,” Gensler said. in a report. “It is important that investors can be confident that any advice or recommendations they receive are designed to serve their best interests.”

Gensler previously promised to “get the most out of” Reg BI when he first appeared before Congress last year as SEC chairman, Law360 reports.

The SEC said the bulletin will help broker-dealers and investment advisers “meet their obligations” to the retail investors in their custody.

Selecting an account type is a significant decision for retail investors and is associated with potentially significant conflicts of interest and raises particular issues for finance professionals operating within dual registered or affiliated businesses, as well as for dual-licensed finance professionals,” the agency said.

The new guidelines have also been designed to help businesses and finance professionals begin to consider “reasonably available alternatives”, as well as a better understanding of how to deal with conflicts of interest and the adoption of policies. and more reasonable procedures, according to the SEC.

The SEC also proposed a new rule this month that compel public companies to disclose on the impact and effects of their business on climate change.

Did you use a broker or investment advisor to make retail investment decisions? Let us know in the comments!



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