SEC Broker-Conflict Rules Face Wary Dems, States, and AARP

On June 5th, the Securities and Exchange Commission approved a final regulation that governs the conduct of broker-dealers and their advisors. The name of the guidance is Regulation Best Interest, known as Reg BI.

Reg BI won’t apply until June 30, 2020, roughly a year from now, but it is already generating a lot of controversy. Brokers (financial advisors, financial representatives, and wealth managers) argue that it will reduce their costs by not making them comply with pesky and expensive requirements.
Investor advocates argue that this will reduce their benefits by allowing brokers to promote their own interests over the interests of their clients.

The new rule requires disclosure of potential conflicts of interest to customers, but those disclosures are often wordy and complicated. So, clients will also get a Customer Relationship Summary, or CRS, a shorter, plain-English document that generally explains the services, compensation and conflicts of a broker-dealer.

This may not have much of an impact, as clients don’t any way to act on this information, because the same applies to everyone in the industry and there is really no option to say, “Please let me know of any individual transaction that may be the result of conflicts.”

It may not be over.

Wall Street’s victory securing new broker conflict-of-interest rules at the SEC is by no means final.The regulatory overhaul directing brokers to act in their customers’ “best interest” faces potential challenges in the courts, Congress, and inside the Securities and Exchange Commission itself, if a Democrat takes control after the 2020 elections. Investor advocates, Democratic leaders, and state officials eventually may reshape the Regulation Best Interest package a divided SEC adopted June 5.

Source: SEC Broker-Conflict Rules Face Wary Dems, States, and AARP

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