Close Close

Industry Spotlight > Broker Dealers

SEC Reg BI Would Make It 'Substantially Easier' to Bring Enforcement Actions: Peirce

Your article was successfully shared with the contacts you provided.

The Securities and Exchange Commission’s proposed Regulation Best Interest for brokers would “make it substantially easier” for the securities regulator to bring enforcement actions against brokers “who have subordinated their clients’ interests to their own,” according to SEC Commissioner Hester Peirce.

Peirce, a Republican, also told financial planners during a recent speech that the SEC’s advice standards package’s Customer Relationship Summary form, or Form CRS, while “replete with legal terminology,” would serve as “a great place to start advancing a digital-based disclosure system.”

Some of the Reg BI “put-downs” the agency has received “seem to ignore the text of the proposed rule and the limits of the fiduciary regime,” Peirce stated.

Reiterating her previously stated views, Peirce explained that many of the Reg BI critiques “are based on the assertion that because broker‑dealers would not be subject to the same fiduciary duty to which advisors are subject, broker-dealers’ conflicts of interest with clients would continue to exist to the detriment of their clients.”

Under Reg BI, some have complained, “broker-dealers would ‘only’ have to mitigate and disclose the conflicts of interest but could continue to give advice colored by the conflicts.”

However, she stated, “the requirements addressing conflicts of interest included in proposed Regulation Best Interest are stronger than those required by an investment advisor’s fiduciary duty to its client.”

Proposed Reg BI would require “disclosure and at least mitigation of any material financial conflict of interest a broker-dealer may have with its client. An advisor is required only to disclose such a conflict.”

As to Form CRS, the four-page disclosure document, as proposed, “suffers from the paper-centric, regulator-centric status quo,” Peirce said.

“The four‑page (at most) document is to be delivered in addition to — not in place of — any of the disclosure documents that broker-dealers and advisers currently provide,” Peirce stated.

The agency, she continued, “should draw on the many comments we have received to inform changes to Form CRS to make it more useful for retail investors in both content and delivery.”

Digitizing the form would “be a wonderful opportunity for us to encourage firms to experiment with videos, mobile apps, interactive web-based disclosure, and whatever else they can think up with the benefit of their millennial technology savants,” Peirce opined.

Form CRS also would be “a perfect place to allow firms to talk to investors in language that is not riddled with legalese and technical terms,” she added.

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.