The SEC will consider three new standard of conduct recommendations for brokers at an open meeting on April 18, Dalia Bass, SEC director of investment management, said at the agency's National Compliance Outreach Seminar Thursday.
The eagerly anticipated recommendations will be the SEC’s first volley in creating a new “standard of conduct” for brokers, who currently are held to a suitability standard when they work with investors In contrast, investment advisors are required to uphold a fiduciary standard, which requires them to go beyond suitability to choose the best product or service for their clients.
The SEC is looking to update regulations at a time when the lines between brokers and advisors are blurring, with more broker-dealers entering the advisor business with fee-based, advisory accounts.
“We will look at a standard of conduct proposal with three recommendations. ... A major goal of this initiative is to address investor confusion and lack of clarity regarding services investors receive from investment advisors and broker-dealers, so if the commission approves the recommendations we will be seeking input,” said Peter Driscoll, the director of the SEC’s Office of Compliance, Inspections and Examinations.
“Investment advisors at firms that are dually registered are in some ways uniquely situated to understand whether what the commission is proposing is going to get at the problem. You’re very well situated to suggest ways in which the proposal can be improved,” Driscoll added.
Duane Thompson, senior policy analyst at Fi360, said he wants to know if the new disclosure requirements will create redundant compliance costs with no demonstrable increase in investor protection.
These are some of the other questions Thompson has about the SEC proposals:
· Will the SEC address advisor-like titles used by non-fiduciary brokers?
· What is the impact on dually registered broker-dealers and the extent to which disclosures serve as a remedy for conflicted advice?
· Will the absence of a uniform standard of conduct applicable to both broker-dealers and registered investment advisers create unnecessary costs and created unintended fiduciary gaps in investor protection?