The SEC’s final rule will be similar to the proposal, but it will include some changes that benefit financial firms, according to people familiar with the matter. For instance, brokers will probably get more leeway in informing clients of certain conflicts, said two of the people who asked not to be named in discussing internal SEC deliberations. A key tweak is that disclosures won’t necessarily have to be in writing, the two people added.
Industry Lobbying
The revisions come after the Securities Industry and Financial Markets Association, Wall Street’s biggest trade group, urged the SEC in an August letter to make clear that brokers shouldn’t have to notify clients of conflicts each time they make a trade on their behalf.
An issue being watched closely by investor advocates is whether the SEC asserts that its best-interest standard preempts any similar regulations adopted by states, which started proposing stepped-up requirements on brokers after the Obama administration ’s rules were overturned in 2018. Sifma has called for a uniform federal standard, arguing that proposals like one recently issued by Nevada “would result in an uneven patchwork.”
The SEC vote will also touch on investment advisors, money managers who compete with brokers and operate under the more stringent fiduciary standard. Many consumers aren’t aware of the difference, and investor advocates have long contended that the two should be subject to the same code of conduct.
Advisor Breaks?
In a fresh twist to the years-long fight, some are now concerned that the SEC might actually weaken the fiduciary obligation for investment advisors as part of the new rules for brokers. Those worries stem from additional guidance that the SEC is expected to also approve next week, which clarifies the responsibilities money managers have to their clients and re-defines the standard.
The spokeswoman for Clayton said the agency is seeking to reaffirm, and in some cases clarify, the existing fiduciary duty that investment advisors owe to their clients.
This article was provided by Bloomberg News.