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SEC's Clayton: Broker, Advisor Titles Need More Clarity
Financial Advisor; February 23, 2018
The Securities and Exchange Commission’s forthcoming best-interest proposal will need to address the titles that brokers, dually-registered advisor reps and others use with customers in order to create meaningful protections for investors and the markets, SEC Chairman Jay Clayton told securities regulators and attorneys at PLI’s SEC Speaks conference on Friday.
Clayton, who kicked off the two-day Washington D.C. event, said that clearing up investor confusion would be a leading priority. “There is no doubt there is a great deal of confusion in the marketplace as to what standard of conduct applies to a particular relationship,” he said.
Attorneys who have met with Clayton told Financial Advisor that he would like to take “a pragmatic approach” to best-interest rules, which would apply solely to brokers and dually-registered investment advisor reps. Investment advisors would continue to be regulated as fiduciaries under the Advisor Act of 1940.
Establishing regulatory clarity and harmony are also a priorities for the SEC. In one hypothetical situation Clayton described, a single investor’s account could expose advisors to the rules and regulations of at least five state and federal regulators, in addition to state attorney generals and possibly bank regulators.
SEC commissioners cheer Clayton's efforts on fiduciary rule collaboration
InvestmentNews.com; Feb 23, 2018 @ 5:16 pm
A new energy and spirit of cooperation that Securities and Exchange Commission Chairman Jay Clayton has brought to the agency may help it overcome past divisions that have stymied an investment advice regulation, members of the commission said Friday.
The SEC plans this year to propose a fiduciary duty regulation. In fact, Mr. Clayton indicated Friday that it is at the top of the agency's rulemaking agenda. In tackling the issue, he's taking on its long history of fracturing the commission.
But things may change this year because Mr. Clayton has fostered collaboration among the agency's five members, according to Hester Peirce, a Republican SEC member who took office in January.
"I think it's going to be key" to advancing a fiduciary duty rule, Ms. Peirce said on the sidelines of the Practising Law Institute's SEC Speaks in Washington. "The fact that we're all sort of working toward getting something done is really helpful."
Complex Investment Products Lead to Sales Abuses, SEC Official Says
Financial Advisor; February 23, 2018
Abuses involving the sale of complex financial products to unsophisticated investors will continue to be an enforcement hot button in 2018, SEC Commissioner Kara M. Stein warned securities attorneys at the PLI’s SEC Speaks conference in Washington D.C. on Friday.
Despite SEC enforcement actions, “the commission continues to see abuses relating to the purchase and sales of complex products,” said Stein.
“Investors can lose money, or even a lot of money, but that’s not the issue,” Stein said. “What concerns me is the disconnect between what investors actually understand and what they really need to understand in order to have a fighting chance at using these products the way they are designed to be used.”
What would the SEC consider “complex” from a product sales perspective? Exchange-traded products and over-the-counter structured notes linked to indices could both be overly complex for retail investors, Stein said.
Undisclosed, lavish trips are creeping into the injury settlement business
Yahoo Finance; February 23, 2018
Conflicts of interest long common to parts of the annuity industry have crept into the structured settlement industry.
If someone gets injured at an amusement park and sues the park’s owner, both parties may come to a settlement. Instead of the defendant paying the settlement all at once in a lump sum, the two sides will often agree to a “structured settlement.” With the help of a broker, the defense will purchase a special type of annuity that provides periodic compensation to the injured party.
Income for injury victims who received structured settlements have a special tax-free status, thanks to bipartisan legislation from the Reagan era. They also have blessings from plaintiff and defense bars and judges, which often consider them to be helpful options for the physically disabled.