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Tuesday, October 26, 2021

SEC proposes ‘best interest’ standard for retail investors

SEC proposes 'best interest' standard for retail investors© Reuters. To match Special Report SEC/INVESTIGATIONS

By Elizabeth Dilts

NEW YORK (Reuters) – The U.S. Securities and Exchange Commission on Wednesday proposed a rule that requires new disclosures for registered broker-dealers giving investors financial advice.

The 1,000-plus page Regulation Best Interest would require brokers to more clearly disclose fees and conflicts of interest, but does not require them to act as fiduciaries.

If passed, it would replace the U.S. Department of Labor’s so-called “fiduciary rule,” an Obama-era measure that was overturned in March by the 5th U.S. Circuit Court of Appeals.

SEC Chairman Jay Clayton said the proposed rule “should increase investor protection without adversely affecting investor choice” by bridging “any gaps between what retail investors expect from their investment professionals and what our laws require.”

The proposed rule would require brokers at the 3,800 firms registered with the SEC and the Financial Industry Regulatory Authority to provide clients with a four-page disclosure that explains the broker’s compensation related to specific investment products and provides questions investors can ask their broker.

The SEC did not include an estimate on how much implementing the rule would cost firms, a step the Department of Labor had taken in its rulemaking.

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Source: Investing.com

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