Brokers should carefully consider alternatives before recommending cryptocurrencies, asset-backed securities, and other risky and complex products.
Also, if they happen to be in a firm that is also a registered investment advisor, they need to make sure they are billing their clients in a way that serves their interests.
these are, The Securities and Exchange Commission began distribution on Thursday. The SEC, which oversees most of the wealth management industry, is issuing this bulletin as the last of three guidance documents it planned to distribute after adopting regulatory top rates for the broker-dealer industry in June 2019. bottom.
This time, The SEC is calling attention to what it calls a duty of care, the responsibility to reasonably understand the client’s objectives and to attend to the client’s best interests.covered in the previous two bulletins Account recommendationsincluding 401(k) rollover, and Avoiding Conflicts of Interest.
The SEC’s general goal is to shed light on brokers’ obligations under regulatory best interests, which are often characterized as weaker than fiduciary responsibilities governing the conduct of financial advisors. Both standards, however, require financial planners to be mindful of their clients’ best interests, to eliminate conflicts of interest wherever possible, and to disclose unavoidable conflicts of interest.
SEC officials said Thursday that there is one big difference. Regulation Best Interest, or Reg BI for short, only applies when a broker recommends investments or assists investors in completing trades. The fiduciary standard applies to the entire advisor-client relationship.
To date, the SEC has filed one compulsory action under Reg BI and the Financial Industry Regulatory Authority, a self-regulatory body for the securities industry. Only started a few more times. The regulator has said it plans to be tougher on Reg BI violations this year.
SEC officials said Thursday that the latest staff bulletin further shows what advisers and brokerage firms need to do if they want to stay on the right side of the law. Here are some of their tips: