The SEC is Failing to Serve Retail Investors
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The Securities and Exchange Commission has proposed new rules for advisors and brokers. The rules purport to clear up investor confusion with new disclosures and raise the standard for brokers. Unfortunately, they lack both the clarity and enforcement muscle to be effective.
SEC Chairman Clayton wrote that “to improve investor understanding” there is a “new disclosure mandate” requiring advisors and brokers disclose “the type of professional they are” and their services, fees and conflicts of interest.
Those April 18 proposals, if enacted, would also mean broker and advisor core duties would be essentially the same, according to the chairman. “We’ve called it the best-interest standard, but I want to be clear – for broker-dealers there are core fiduciary principles embodied in that best-interest standard,” as per an article in Investment News. Doing so, the SEC can “eliminate the gap” between “what retail investors would reasonably expect the law to provide and what regulations actually require.”
The proposed rules set ambitious objectives expressed in aspirational statements. They fall far short, however, in providing the clarity and muscle necessary to be real fiduciary and enforceable rules. They are not even close to being what “retail investors would reasonably expect.”