Confusion (Image: Thinkstock)

As the Securities and Exchange Commission gears up to hold its first town hall meeting in Atlanta on Wednesday to get feedback on its standard of conduct proposals, AARP argues that any final rule issued by the securities regulator must include two “important” changes: “clearly define the standard of conduct for investment professionals as a ‘fiduciary standard,’ and provide investors with unambiguous, effective disclosure forms.”

While AARP “appreciates that the SEC is trying to impose a higher standard than suitability” for brokers under its Regulation Best Interest, the securities regulator “does not impose a fiduciary standard [on brokers] and does not define what best-interest means,” said David Certner, AARP’s legislative counsel, on a Tuesday morning call with reporters.

Certner — who will testify at the SEC’s Investor Advisory Committee meeting on Thursday, which is also being held in Atlanta — stated on the call with reporters that as it stands now, it’s “not clear what standard it is they [the SEC] is trying to adopt. It’s difficult to understand what they mean by these terms. Best-interest is a fiduciary type of standard,” Certner said, but if the term is left “so vague,” no one — practitioners or investors — will understand what it means.

“We need a lot more clarity in what the standard means,” he continued. “It has to be clear[er] when people are acting in the ‘best interest’ and when they are not.”

Vague standards, he added, opens “the door to litigation, and the standard will be set by the lawsuits that will be brought.”

AARP along with the state attorneys general filed motions on April 26 to intervene in the 5th Circuit appeals court ruling to vacate Labor’s fiduciary rule, but were denied twice.

Certner said that AARP “is not planning any additional action” at this time regarding the 5th Circuit ruling.

As to why the 5th Circuit has not yet issued the mandate to vacate Labor’s fiduciary rule, Certner said that he could only speculate that the court may not be acting because “other actions by the states” can be pursued.

SEC Chairman Jay Clayton urged commenters in late April to review the standard of conduct proposals “thoroughly, and then engage with us on it — through comment letters, one of the investor roundtables,” which he said will take place in Atlanta, Denver, Houston and Miami, or in meetings with the agency.

— Related on ThinkAdvisor: