Fiduciary advocates called on the Securities and Exchange Commission to rebrand its sweeping Regulation Best Interest rule package and call it instead the “New Suitability.” That will ensure retail investors understand they are not working with fiduciary advisors, claimed fiduciary advocates.

One of those people is Knut Rostad, founder of the Institute for the Fiduciary Standard, who said his group also plans to ask the SEC to strengthen investor disclosure rules so brokerage customers aren’t misled into believing reps are required to put customers’ best interests first. And the institute wants the agency to effectively disclose the different standards of legal loyalty between reps and fiduciary advisors.

“Broker-dealers cannot be fiduciaries,” Rostad said. “B-Ds are designed and built to represent issuers and other sellers. Their purpose contravenes the purpose of investment advisors, who are required by law to represent clients as fiduciaries.”

He believes the SEC “increased investor confusion by widening the disparities between investor expectations and the actual standards of conduct,” when it implemented Reg BI on June 30, 2020.

The fiduciary advocate said the institute plans to lobby the now Democrat-led SEC for changes to increase retail investor protection and understanding.

• The institute wants the agency to rebrand Reg BI as the “New Suitability” standard for broker-dealers, in reference to the old Financial Industry Regulatory Authority rule that required reps to reasonably believe a certain investment decision would benefit a client before making a recommendation.

• It wants the SEC to affirm that broker-dealer product recommendations are distinct from best-interest fiduciary advice.

• It wants the SEC to mandate disclosure to underscore the stark differences between fiduciary advice and product sales and test such language with consumers.

• It wants the agency to make clear that conflicts of interest inherently violating the client’s best interest must be avoided. Disclosure alone is insufficient.

B-Ds and investment advisors are not just “different,” Rostad added—their purposes are in direct opposition to each another. “Merging the standards, as the SEC did, to create a uniform standard is impossible. Broker-dealers cannot meet a best-interest fiduciary standard.”

The group is asserting that the time is right to make meaningful inroads on the fiduciary front, given the new Biden administration and Democratic leadership in Congress and on the SEC. “The new year brings a new president and a new commission with new thinking,” Rostad said. “Biden’s nominee for SEC chairman, Gary Gensler, is uniquely qualified to lead the commission. His combined experience at Goldman [Sachs] and the [Commodity Futures Trading Commission] may be unprecedented. We are optimistic he understands this new thinking.”

“We propose that the commission move swiftly to correct the prior rulemaking and interpretations,” Rostad added. “Doing so will provide significant, positive and immediate impacts on investor protection and capital formation. In addition, these changes will advance the emerging investment advisor profession.”

Brian Hamburger, an attorney and the founder and president of MarketCounsel, a business regulatory compliance consulting firm for advisories, said there are obvious differences between the brokerage and RIA industries, but both should be able to “align on the priority of leveling with investors.” That alignment is needed to regain investor trust, added Hamburger.