Wall Street’s main regulator is putting the investment industry on notice that brokers and financial advisors must abide by similar codes of conduct when helping retail clients choose which type of account to open.
SEC staff on Wednesday said that both types of financial professionals share comparable duties to their customers. While rules for advisors and brokers kick in at different times, “they generally yield substantially similar results in terms of the ultimate responsibilities owed to retail investors,”
The guidance touches on the controversial policy debate about conflict-of-interest rules and what it means for brokers to act in the interest of their clients. The question has long been the subject of lawsuits and partisan bickering. During the Trump administration, investor advocates and Democrats chided a related regulation for being too lax, fueling speculation the SEC would replace it under Chair Gary Gensler.
Wednesday’s bulletin signals that the regulator is likely to keep the rule in place but interpret it in a more stringent way. Even though they don’t carry the legal weight of a rule, SEC staff bulletins are closely watched by industry.
The document says that there are differences between the fiduciary standard that applies to investment advisors and the rules for brokers — but it also emphasizes how the conduct requirements are similar.
Both “are drawn from key fiduciary principles that include an obligation to act in the retail investor’s best interest and not to place their own interests ahead of the investor’s interest,” the SEC staff said.
