The Securities and Exchange Commission has released new rules proposals regarding advice for retail investors. The agency has proposed a new document it has dubbed a “customer relationship summary” (CRS), which is supposed to help the public distinguish between broker/dealers and investment advisors.

It has been over two months since the release, and I am still flabbergasted at how badly the SEC missed the mark.

To provide more consumer protections, the SEC proposes “Regulation Best Interest” as an enhancement to the suitability standard. Sadly, Reg BI, as some are calling it, would be better described as Reg BS.

The release acknowledges that there is a difference between suitability and fiduciary standards, with suitability being a lesser standard than those fiduciary duties that apply to advisors. This difference is offered as a reason for this new regulation.

The release states, “Our goal in designing proposed Regulation Best Interest is to enhance investor protection, while preserving, to the extent possible, access and choice for investors who prefer the ‘pay as you go’ model for advice from broker-dealers, as well as preserve retail customer choice of the level and types of advice provided and the products available.”

That sounds nice, but the proposal veers off course quickly. It is fundamentally flawed and actually makes the consumer’s choice more difficult.

Rebranding Suitability

First, Reg BI is simply not a substantive change from suitability. Here is Finra’s explanation of suitability from its website:

Suitability Obligations

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