“The rules conspicuously move away from true fiduciary principles by relying on a legalistic “relationship summary” document that is intended to describe the parameters of the relationship between the broker-dealer and the retail customer. This is a key indication that the SEC has backed away from a clear fiduciary duty for broker-dealers,” Galvin said.
The fact that the SEC does not define “best interest,” is another glaring error, he said. “This ambiguity will lay the groundwork for the same debates and litigation that exist today under the ‘suitability’ standard that applies to broker-dealers.
“Ongoing harm to retail investors and particularly investment investors, who have suffered significant losses as a result of brokers’ conflicted advice, should have motivated the SEC to come up with a standard that is enforceable by regulators and investors,” Galvin said.
“The needs of everyday investors should have been the guiding factor for this rule-making, but the SEC has fallen short by proposing a standard that will preserve some of the most problematic practices in the brokerage business,” he added.