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April 27, 2018 at 10:36 AM
The Securities and Exchange Commission’s newly released Regulation Best Interest proposal for brokers embodies “core fiduciary principles,” the agency’s chairman, Jay Clayton, told a House Appropriations Subcommittee on Thursday.
Rep. Tom Graves, R-Ga., chairman of the Subcommittee on Financial Services and General Government, asked Clayton to provide an update on “what we once knew as the fiduciary rule, but is now being re-discussed as the best-interest proposal.”
Clayton explained that the duty an advisor or broker-dealer should owe to the client “should match that client’s expectations,” and that the client also “ought to be able to understand that duty.”
That relationship, Clayton continued, “should be governed by fiduciary principles.”
While the agency has called its new proposed rule for brokers “the best-interest standard,” Clayton said, “I want to be clear: For broker-dealers, there are core fiduciary principles embodied in that best-interest standard. In fact, those fiduciary principles, I believe, are the same as the fiduciary principles that are embodied in the investment advisor standard.”
What has the agency done in its proposal? Clayton asked rhetorically.
“We’ve recognized that the relationship between and investment advisor and their client is a different type of relationship than a broker-dealer and their client. But we’ve sought to harmonize the actual duties that are owed recognizing those differences.”
