WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission (SEC) on Wednesday issued new guidance for broker-dealers and investment advisers on how to meet their obligations to retail investors and Comply with agency rules when recommending investment products.
The guidance clarifies the obligations of dealers and advisers under the SEC’s long-standing Investment Advisor Fiduciary Standard and its Best Interest Regulation Rule, adopted in 2019.
A key objective is how much brokers and advisers must disclose in cases where they may have conflicts of interest. Investment firms often offer brokerage accounts and advisory accounts, but the rules governing these two types of accounts differ. Advisors should put clients’ interests before their own, while brokers should only believe that recommendations are suitable for clients.
The SEC wants to ensure that advisers and brokers consider alternatives and costs, address conflicts of interest, and implement policies and procedures for making recommendations.
“Companies can have a material conflict of interest if the type of account that is most profitable for them, for example, is not the type of account that is best for (a) particular investor,” an official said. of the SEC.
The Republican-led SEC finalized Reg BI in 2019 in what was widely seen as a victory for Wall Street after its 10-year battle over regulation of the investment advisory industry. He rejected a more onerous proposal from the Department of Labor.
Consumer groups have criticized Reg BI for being too vague in its definition of “best interests” while failing to address all disputes, including the higher payments brokers receive for selling more expensive products at to exchange.
Wednesday’s measure under the now Democratic-led SEC aims to close some of those loopholes, analysts said.
(Reporting by Katanga Johnson in Washington; Editing by Michelle Price)
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