The Securities and Exchange Commission Investor Advisory Committee urged the commission Wednesday to strengthen and clarify its standards-of-conduct package proposal covering investment advisory professionals.
In its eight-page recommendation, the committee called on the SEC to clarify its best-interest standard, which is the main part of the package and compels brokers to put clients’ financial interests ahead of their own and requires them to mitigate financial conflicts. The committee asked the SEC to make it clear that under the best-interest standard, brokers would be obligated to recommend investments, investment strategies, accounts or services “that they reasonably believe represent the best available options for the investor.”
The committee also supported expanding the best-interest standard to cover recommendations about whether to roll over money into an individual retirement account from an employer-sponsored plan, what type of account to open, and the scope of services to be provided.
“Only a tough standard of conduct for brokers” can protect investors, Heather Slavkin Corzo, senior fellow at Americans for Financial Reform in Washington, said in a statement on the recommendation. “The SEC has the important job of protecting everyday investors,” she added. “It needs to improve the rule so that it genuinely does that, not one that provides a dangerous veneer of protection that only leaves people more at risk.”
In concluding its recommendations, the committee said it hopes to assist the commission in “refining its proposed approach to better achieve the goal of ensuring investors receive the best interest advice and recommendations they expect from the financial professionals they turn to for help with their investments.”
According to its regulatory agenda, the SEC will issue a final rule on the package by September.