May 09, 2018

SEC proposed a package of rulemakings and interpretations designed to enhance the quality and transparency of investor relationships with investment advisers and broker-dealers, while preserving access to a variety of types of advice relationships and investment products. Comments are due by August 07, 2018.

The proposed rules and interpretations would enhance investor protection by applying consistent principles to investment advisers and broker-dealers: provide clear disclosures, exercise due care, and address conflicts of interest. The specific obligations of investment advisers and broker-dealers would be, however, tailored to the differences in the types of advice relationships that they offer. Under the proposed Regulation Best Interest, a broker-dealer would be required to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer. Regulation Best Interest is designed to make it clear that a broker-dealer may not put its financial interests ahead of the interests of a retail customer in making recommendations. SEC also proposed:

  • An interpretation to reaffirm and, in some cases, clarify its views of the fiduciary duty that investment advisers owe to their clients. By highlighting principles relevant to the fiduciary duty, investment advisers and their clients would have more clarity about advisers’ legal obligations.
  • To help address investor confusion about the nature of their relationships with investment professionals through a new short-form disclosure document—a customer or client relationship summary. Form CRS would provide retail investors with simple, easy-to-understand information about the nature of their relationship with their investment professional and would supplement other more detailed disclosures. For advisers, additional information can be found in Form ADV.  For broker-dealers, disclosures of the material facts related to the scope and terms of the relationship would be required under Regulation Best Interest.
  • To restrict certain broker-dealers and their financial professionals from using the terms “adviser” or “advisor” as part of their name or title with retail investors.  Investment advisers and broker-dealers would also need to disclose their registration status with SEC in certain retail investor communications.

 

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Comment Due Date: August 07, 2018

Keywords: Americas, US, Securities, Regulation Best Interest, Investor Protection, Retail Investors, Form CRS, Form ADV, SEC

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