(Bloomberg News) The relationship between retail investors and those who advise them may be rewritten after the U.S. Securities and Exchange Commission releases three studies on the regulation of brokers and advisors.

The agency was asked by Congress in July to look at making brokers who give personalized advice follow a more stringent "fiduciary duty" that puts their clients' best interests first when selling products. The SEC was also required to evaluate the examination of advisors and consider moving oversight to an outside organization. Both studies are expected this week, along with a third calling for recommendations about improving public access to background information on advisors.

Commissioners are still debating whether to make recommendations or present lawmakers with specific options, according to a person familiar with the discussion, who asked not to be identified because the studies haven't been released. Though the reports mandated by the Dodd-Frank legislation may not turn into rules, SEC commissioners have pressed for changes. Congress did authorize the SEC to issue rules on the broker standard if a change is suggested in the study.

"Regulation of a financial professional should depend on what she does, and not what she calls herself or how she is paid," said Commissioner Elisse Walter in a February 25 speech. She also said she was pleased to see Congress "addressing this regulatory inconsistency, which has been allowed to exist for too long and results in just too much confusion."

Having brokers follow the same fiduciary standard as registered investment advisors, based on the Investment Advisers Act of 1940, would mark a massive shift, and the brokerage industry has tried to alter that standard.

'Best Interests'

"If you are giving advice to an investor, regardless of the title on the business card, you should always be bound to do so in the best interests of the client," SEC Commissioner Luis Aguilar said in a March 26 speech. Chairman Mary Schapiro, a Democrat like Walter and Aguilar, said in a May 6 speech that brokers "should meet that same high fiduciary standard."

Broker-dealers currently are held to a "suitability" standard that calls for advice that meets their clients' needs when the product is sold, instead of the fiduciary duty upheld by registered investment advisors. Industry groups, such as the Securities Industry and Financial Markets Association, support a "uniform federal fiduciary standard" for those dealing with retail clients, and have said the existing standard should be revised.

SIFMA said in a November 17 letter to the SEC that any standard that may emerge from the six-month study due January 21 must "reflect the many different business models currently in effect serving investors."

'Watering Down'

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