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The SEC issues new guidance for brokers, advisors



(Reuters) – The US Securities and Exchange Commission on Wednesday issued a new guide to brokers and investment advisers on how to meet their obligations to private investors and follow the firm’s rules when recommending investment products.

The guidance clarifies the obligations of brokers and advisers under the SEC’s long-standing Investment Advisor Fiduciary Standard and its Regulation Best Interest rule, adopted in 2019.

A central focus is how much brokers and advisors should disclose in cases where they may have conflicts of interest. Investment companies often offer brokerage accounts and advisory accounts, but the rules for these two types of accounts differ. Advisors must put clients̵

7; interests before their own, while brokers should only believe that recommendations are appropriate for clients.

The SEC wants to ensure that advisors and brokers consider options and costs, address conflicts of interest, and implement policies and procedures to provide recommendations.

“Companies can have a significant conflict of interest if the type of account that is most profitable for them, for example, is not the type of account that best suits (for) a particular investor,” said an SEC official.

The Republican-clad SEC ended Reg BI 2019 in what was widely seen as a win for Wall Street after its 10-year battle to regulate the investment advisory industry. It opposed a more burdensome proposal from the Ministry of Labor.

Consumer groups criticized Reg BI for being too vague in its definition of “best interest” while not addressing all conflicts, including the higher payments brokers receive for selling products that are more expensive to trade.

Wednesday’s action under the now Democrat-led SEC is trying to close some of these gaps, analysts said.


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