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DOL Fiduciary News: April 19, 2018

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Trump's SEC Proposes Obama-Era Broker Conflict Rules Rewrite

Bloomberg; April 18, 2018, 7:08 PM EDT

The U.S. Securities and Exchange Commission on Wednesday proposed overhauling its conflict-of-interest rules for brokers, a move likely ensuring that Wall Street won’t have to comply with much tougher regulations approved at the end of Barack Obama’s presidency.

At a public meeting in Washington, SEC commissioners led by Chairman Jay Clayton voted 4-1 to seek public comment on a “best interest” obligation for brokers. While the standard is stiffer than existing SEC requirements, it’s not as stringent as the fiduciary duty that forces investment advisers to put clients’ interests ahead of their own.

In 2016, Obama’s Labor Department sought to extend a fiduciary obligation to brokers who offer retirement advice, but those strictures are in limbo after being struck down by a federal appeals court.

The SEC proposal comes after weeks of wrangling among the agency’s commissioners and months of input from investor advocates and industry groups. The regulations mark an attempt by Clayton – a former big bank lawyer appointed by President Donald Trump – to address legal and regulatory uncertainties triggered by Labor’s controversial rules.

If the SEC’s roughly 1,000-page plan goes into effect, the industry expects it to replace the Obama-era constraints.

SEC advice rule: Industry groups brace for debate

InvestmentNews; Apr 18, 2018 @ 6:32 pm

Financial services industry groups scrambled on Wednesday afternoon to get out ahead of and then respond to the SEC's proposed advice rule, which is designed to lay the foundation for upgraded financial advice standards.

As the Securities and Exchange Commission voted 4-1 to propose an investment advice rule package that would revise standards of conduct for brokers and investment advisers, Barbara Roper, director of investor protection at the Consumer Federation of America, described the SEC's proposal as a "modest improvement over the status quo, but not the clear standard we believe is needed."

Specifically, she added, "the standard must clearly require brokers to recommend the best available investment option, based on reasonable assumptions and a careful review of the needs of the investor and the characteristics of the investments, or it should not be called a best interest standard."

Ms. Roper, did however, find encouragement in the requirement to mitigate financial conflicts.

"While it falls short of the strict limits on conflicts in the DOL rule, it appears stronger than the meaningless disclosure-only approach to conflicts advocated by the industry," she said. "We look forward to working with the Commission to turn this far-from-perfect proposal into a true best interest standard we can enthusiastically support."

New SEC Proposal Should Even Out Your Best Interest Playing Field: ACLI

ThinkAdvisor | April 18, 2018 at 06:28 PM

The American Council of Life Insurers (ACLI) today celebrated the birth of the U.S. Securities and Exchange Commission’s own fiduciary rule draft.

SEC members voted 4-1 this afternoon to put the draft through a 90-day public comment period.

SEC Chairman Jay Clay said the SEC ought to move to fill the gaps between investor expectations of broker-dealers and investment advisors and the legal requirements, in a way that would coordinate the SEC’s actions with the actions of the SEC’s fellow financial services regulators.

…Dirk Kempthorne, the president of the ACLI, said in a statement that the ACLI welcomes the SEC’s efforts.

“We are encouraged by the SEC proposal to implement a best interest standard of conduct that can be uniformly applied across all regulatory platforms — the states, FINRA, and the Department of Labor,” Kempthorne said in the statement. “ACLI strongly supports comments made by SEC Chairman Clayton at the meeting about the need for regulatory coordination. 

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