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Investor Advocates Are Cautious about SEC Fiduciary Rule

April 16, 2018

Proponents of stronger investor protection say the SEC’s pending investment advice standards proposal has the components necessary for a strong rule, but some question whether it will go far enough, InvestmentNews writes.

The SEC has announced it will review three areas of broker conduct Wednesday: Disclosures by RIAs and broker-dealers about their relationships with investors; a broker conduct standard; and an interpretation of the standard applied to investment advisors, according to the publication.

Barbara Roper, director of investor protection at the Consumer Federation of America, tells InvestmentNews those are the three components the SEC’s regulation “needs to be a good rule.” But it remains to be seen whether the SEC’s standard of conduct will go far enough “to reform harmful broker-dealer business practices,” she said, according to the publication.

Andrew Stoltmann, president of the Public Investors Arbitration Bar Association, is far more skeptical.

“So far, so bad,” Stoltmann says of the SEC’s outline for its standard of conduct regulation. According to Stoltmann, the SEC’s rule would be disclosure-based, which he says is “grotesquely bastardized from what the [Department of Labor] rule is,” according to InvestmentNews.

The DOL’s fiduciary rule, which requires retirement account advisors to put clients’ interest first and went into partial effect last summer, has since been vacated in an appeals court. But Kevin Carroll, managing director of Sifma, says it’s too soon to tell whether the SEC will go for a disclosure-based approach— which he tells InvestmentNews would not go far enough to create a best-interest standard. “We’re cautiously optimistic,” he tells the publication.

Barbara Roper

Investment Adviser Association president and chief executive Karen Barr, meanwhile, tells InvestmentNews in a statement that the industry group is happy the SEC doesn’t plan to overhaul the advisor standard but is cautious about its interpretive approach in regard to advisors.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.