SEC Proposes Best Interest Standard for Broker-Dealers, Related Investment Adviser Guidance and New Customer Relationship Summary Form

The U.S. Securities and Exchange Commission on April 18, 2018 published a package of proposed rules and interpretations intended to improve the retail investor experience and to provide greater clarity regarding customers’ relationships with broker-dealers and investment advisers. The proposed rules and interpretations would:

• Create a principles-based standard of conduct for broker-dealers and require broker-dealers to act in the best interest of their retail customers.
• “Clarify and reaffirm” investment advisers’ fiduciary obligations to their clients under the Investment Advisers Act of 1940.
• Create additional disclosure obligations for broker-dealers and investment advisers that are intended to help retail investors better understand the scope and material facts surrounding their relationships with investment professionals.

The SEC also proposed certain compliance obligations for investment advisers, which currently apply only to broker-dealers, as well as labeling requirements to address investor confusion about the capacity in which their financial professionals are acting.

Comments on the proposals are due August 7, 2018.

Read "SEC Proposes Best Interest Standard for Broker-Dealers, Related Investment Adviser Guidance and New Customer Relationship Summary Form."