Articles Tagged with brokers

The US Securities and Exchange Commission is proposing a rule that would keep registered representatives and brokers from also referring to themselves as investment advisors. In almost 1,000 pages of new proposals, the regulator articulated that it wants brokerage firms to make sure that the investing public knows that while brokers can sell investment products they are not trusted fiduciary advisors—nor is it their role to continue to offer advice after a sale has been made. Under the proposed rule, brokers would no longer be allowed to call themselves a trusted “advisor” or “adviser.” They can, however, take steps to become a registered investment adviser.

Addressing the proposed package, SEC Chairman Jay Clayton said that “investor confusion” about what differentiates broker-dealers from investment advisers is what prompted these latest initiatives. While both can give retail investors advice regarding possible investments, the two have different kinds of relationships with them. Clayton also noted that retail investors can suffer harm if they don’t know that certain conflicts of interest may be involved when working with either broker-dealers or investment advisers. Investors also may be giving more authority over their finances to a broker or investment adviser than they should.

In a 4-1 vote this week, the SEC’s ”Regulation Best Interests” measures for brokers was moved forward. Under the new measures, brokers would be obligated to place clients’ best interests before their own when it comes to recommending investment strategies or products. Brokers would have to set up and enforce written procedures and polices that would identify, expose, get rid of, or avoid conflicts of interest that might involve a financial incentive. While the existing broker standard requires that they recommend investment products that are suitable to each client, brokers are still allowed to endorse the products that gives them the greater financial payday.