D-Day is coming.
And now it’s the broker dealers who could be put on the defensive – so to speak.
June 6th is celebrated for D-Day, when the Allied Armed forces landed on Normandy Beach to begin the liberation of Europe from its German occupants. The Securities and Exchange Commission (SEC), the nation’s top financial market regulator, is set to weigh in and possibly vote on Regulation Best Interest (BI) which can free investors from worrying about whether or not their brokers are acting in their best interest on June 5th.
The SEC will decide whether to “establish a standard of conduct for broker-dealers” when they advise retail customers on “any securities transaction or investment strategy involving securities,” according to a notice posted by the regulator on its website.
SEC commissioners will also vote on new rules that would require registered investment advisers and brokers to provide a “brief relationship summary to retail investors.”
Reg BI was originally proposed back in April 2018 and was geared to require brokers to disclose to clients all pertinent information about potential conflicts, while compelling firms to have a “reasonable basis” for concluding that investments were in the best interest of their customers. This would ensure their fiduciary responsibility to clients was well defined and consequently, upheld.
The SEC’s proposal has been controversial, with investor advocates arguing that it isn’t as tough as imposing a so-called fiduciary duty on brokers. Being a fiduciary requires that finance professionals put their customers’ interests ahead of their own.
The commission will also decide on June 5 whether to adopt new and amended rules and forms to require registered investment advisors and registered broker-dealers to provide a brief customer relationship summary, or Form CRS, to retail investors, and whether to publish a commission interpretation of the standard of conduct for investment advisors.
The SEC will also consider whether to publish a commission interpretation of the “solely incidental” prong of section 202(a)(11)(C) of the Investment Advisers Act of 1940.
Robert Colby, chief legal officer for the Financial Industry Regulatory Authority, said at the recent FINRA’s annual conference in Washington that with Reg BI, the SEC is “trying to save the broker-dealer business as we know it.”
