SEC sets June 5 date for vote on Regulation Best Interest

Commission adds new item to agenda: Interpretation of broker guidance that qualifies as advice

May 23, 2019 @ 6:39 pm

By Mark Schoeff Jr.

The Securities and Exchange Commission will vote on an investment-advice reform package on June 5.

The agency posted the agenda for the open meeting on its website Thursday afternoon. The four SEC members will decide whether to adopt Regulation Best Interest, which is designed to raise the advice standard for brokers above the current suitability rule. They also will vote on a final client relationship disclosure document known as Form CRS.

The third of the four items says the commission will "consider whether to publish a commission interpretation of the standard of conduct for investment advisers." It's not clear how this is related to the interpretation of the Investment Advisers Act that the SEC proposed last year as part of the advice reform package.

The fourth item is new. It's labeled "Interpretation of 'Solely Incidental.'" This was not part of the advice reform proposal the SEC released in April 2018. It appears to address the language in the Investment Advisers Act that exempts brokers from registering as investment advisers if advice they give to clients is "solely incidental" to the recommendation to purchase an investment.

Whether broker advice is incidental to their relationship with a customer or at the center of it has been at the heart of a decades-long debate over investment advice standards. The brokerage industry has maintained that broker advice should not subject them to the fiduciary standard that governs investment advisers. Investor advocates say that brokers long ago crossed the line from "solely incidental" to something much more comprehensive and deserving of the fiduciary standard.

"That's the one unanticipated addition to the agenda," said Barbara Roper, director of investor protection at the Consumer Federation of America. "There are infinite possibilities there for the commission to make things even worse by adopting an anti-investor interpretation of 'solely incidental to.'"

Under the SEC advice reform package, brokers would be subject to Reg BI and investment advisers would continue to be fiduciaries. SEC Chairman Jay Clayton has said Reg BI is based on fiduciary principles and would provide investors with similar protections whether they use a broker or adviser.

The reform package proposal drew 6,000 comments.

0
Comments

What do you think?

View comments

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

Latest news & opinion

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

4 strategies for Roth conversions

There's never been a better time to do a Roth conversion, and here are several ways to go about it.

Cetera latest to be hit with data breach of personal information

Company is offering clients complimentary, two-year membership to an identity theft protection and credit monitoring service.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print