SEC Proposals for Investment Advisors

The SEC yesterday proposed significant new regulations affecting the relationship between investment advisors and retail customers.  In substance, proposed Regulation Best Interest would establish a duty for registered advisors and retail brokers to act in the best interest of the customer in recommending securities or strategies, putting the economic interests of the customer first.  This reflects the SEC position that advisors and brokers function as fiduciaries, which in turn places a high burden on the advisor.

Additionally, the SEC proposed yet another form, CRS, a short-form disclosure describing the relationship in simple terms; registered advisors and brokers would both be required to comply.

In substance, major disclosures to be required: any conflicts of interest, an obligation to understand investment products proposed and that they are believed to be in the customer’s best interest.

Details abound.  There is a ninety day comment period after which the SEC may promulgate its new regulations, amend them, or withdraw them.


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