Will the Securities and Exchange Commission’s new package of broker and advisor conduct standards lead to a blurring of the line between brokers and advisors in investors’ minds?

The SEC hasn’t yet released the 1,400 pages of standards, only a one-page fact sheet. But this, along with the content and tone of commissioner and staff statements at this morning’s SEC vote approving the measure, is creating understandable advisor consternation.

At the heart of the advisor industry concerns is the SEC’s new interpretation of the “solely insignificant” exemption, which appears to broaden brokers’ ability to offer advice without having to register as advisors. Advisors are also worried about whether the SEC weakened advisors’ fiduciary standard.

“The jury is still out as to whether or not this will alleviate or exacerbate investor confusion and confusion regarding investment professionals and the duties they provide and standards they’re under,” said Gail Bernstein, general counsel of the Investment Adviser Association, which represents the nation's SEC-registered investment advisor firms.

“We’re not all confident yet how the SEC has handled this," she said. "To the extent that brokers’ ability to offer advice without registering is broadened, we do worry about what impact this will have on advisors. Advisors will continue to act in their clients’ best interest and provide services as they’ve always done. We hope the result of this rulemaking isn’t to further blur the line in how brokers offer their services."

As for the SEC’s new investment advisor standard, she said the IAA has steadfastly maintained it is “unnecessary” because that duty is widely understood and established in law, regulation and professional practice.

“While we are pleased that the commission seems to have made several of the clarifications we requested to the proposed interpretation, we would be disappointed if the commission dropped the most effective, widely used and straightforward articulation of the fiduciary duty—to put your client’s interest first at all times, an articulation that has long framed fiduciary duty,” Bernstein said.

Critics worry that the SEC’s decision to drop the requirement to put clients’ “best interest” first in the advisor standard was an intentional decision on the SEC’s part to create a more competitive, if less-regulated footing for brokers. After all, the agency even left the term “best interest” undefined in the separate broker standard and the brokerage industry is already hailing its new rule as “tougher” than advisors.

One major win for IAA is on the new customer relationship summary (CRS) disclosures approved by the SEC, which will allow firms to present their information in a Q&A format and, instead of requiring paper delivery, would allow video and other formats—all of which IAA fought for.

In contrast, the broker-dealer, insurance and mutual fund industries are embracing the new standards, which appear to fall far short of the fiduciary regulations for brokers they have battled against in court.

The best-interest regulation “will impose a materially heightened standard of conduct for broker-dealers when serving retail clients,” SIFMA President and CEO Kenneth E. Bentsen Jr. said in a statement.

“While principles based, the rule is specific with respect to the duty and obligations brokers owe to their clients, and what steps they must take to comply, including the obligation to eliminate, or disclose and mitigate, certain conflicts of interest.

“Not even the so-called fiduciary standard under the Investment Advisers Act includes the obligation to eliminate or mitigate conflicts,” Bentsen said.

Bentsen went so far as to call the new broker standard “an even higher standard than the one that applies today to investment advisors.”

American Council of Life Insurers (ACLI) President and CEO Susan Neely said, “Reg BI strikes the right note—arming people with the information they need to make good purchasing decisions while safeguarding their access to a broad selection of solutions to secure their retirement.

“Protecting consumers does not mean limiting their choice of products and services,” added Neely, who said the SEC’s approach was “a more sensible and sustainable way to protect consumers than the Department of Labor’s fiduciary regulation that eliminated consumer choice and access to products and services essential to a secure retirement.”

Both SIFMA and the ACLI were part of a winning industry lawsuit that successfully overturned the DOL’s fiduciary rule earlier this year.

The mutual fund industry and its association, the Investment Company Institute, also commended SEC’s new rules.

ICI President and CEO Paul Schott Stevens said, “Regulation Best Interest will better serve investor interests by ensuring investors are afforded strong protections when they receive recommendations from broker-dealers. We look forward to engaging with the SEC and our members as they work to implement the new standards.”

Schott said it now is “crucial” for the DOL to complete its fiduciary rulemaking in a manner that is complementary to the SEC’s rulemaking “to ensure consistent standards for both retail and retirement investors.”