SEC Moves Toward Fiduciary Duty for Brokers in Data RequestJesse Hamilton
The U.S. Securities and Exchange Commission took a preliminary step toward setting a new standard for brokers’ conduct with customers, asking the industry for input on a potential rule.
The SEC requested information today from the industry and public on costs and benefits of requiring brokers to give personalized investment advice that’s in the best interest of clients. The current standard for brokers -- requiring they sell products to clients that are “suitable” at the time of sale -- is lower than that of investment advisers.
“Studies have shown that few investors realize that the standard of care they receive depends on the type of investment professional they use,” SEC Chairman Elisse B. Walter said in a statement. “This request for information will help us in our ongoing consideration of alternative standards of conduct for certain broker-dealers and investment advisers.”
The 2010 Dodd-Frank Act authorized the agency to write a rule setting a uniform standard, and a 2011 staff study suggested it be as stringent as the fiduciary duty for investment advisers.
The data request opens a 120 day window for comment, and the agency specifically requested empirical and quantitative data on the impact of a potential rule, which would affect only business done with individual investors.
The agency has increased its focus on analyzing costs and benefits of potential rules since a 2011 U.S. Court of Appeals decision rejecting an SEC rule because the agency hadn’t adequately assessed its impacts.