The SEC wants to know how you feel about your financial advisor and rules regulating the financial services industry. You have four months to tell them.
Is it important to you that every financial advisor you work with puts your interests first? Should the government impose a uniform standard of conduct on any type of financial advisor? Those are two of the questions the U.S. Securities and Exchange Commission is asking retail investors in a request for information issued on Friday. You have 120 days to respond.
The SEC, the federal agency charged with ensuring fair and orderly financial markets, will consider your answers as if weighs potential changes to rules governing broker-dealers and investment advisors. According to the SEC, current rules leave many retail investors confused about the roles and duties of various financial professionals.
Many financial professionals support the call for a uniform fiduciary standard.
Investment advisors, regulated under the Investment Advisers Act of 1940, are required to act as fiduciaries and serve their clients’ best financial interests. Broker-dealers, regulated under the Securities Exchange Act of 1934, are not uniformly considered fiduciaries to their clients, according to the SEC. Yet, the lines between full-service broker-dealers and investment advisors are increasingly blurred, and the two types of financial advisors provide many overlapping services, such as providing investment advice.
“Studies have shown that few investors realize that the standard of care they receive depends on the type of investment professional they use. And often investors do not know which type of financial professional they are relying on,” said SEC Chairman Elisse B. Walter. “This request for information will help us in our ongoing consideration of alternative standards of conduct for certain broker-dealers and investment advisers, as well as potential harmonization of other aspects of regulation in this area.”
SEC staff, in a report required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, has recommended imposing a uniform fiduciary standard of conduct for broker-dealers and investment advisors advising retail consumers about investing in securities. The move would help eliminate confusions about the standard of conduct required of a financial advisor, while maintaining retail investors’ access to a wide range of products, services and compensation structures.
Wealthy investors are generally comfortable with the fees they pay a financial advisor, but prefer fees to commissions.
A second staff recommendation would “harmonize” certain requirements of broker-dealers and investment advisors. “Retail customers should not have to parse legal distinctions to determine whether the advice they receive from their financial professional is provided in their best interests,” the SEC states, and “retail customers should receive the same or substantially similar protections when obtaining the same or substantially similar services from financial professionals.”
Do you have an opinion? Your comments can be submitted electronically through the Commission’s Internet comment form or via email at firstname.lastname@example.org. The subject line should include File Number 4-606.
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