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December 11, 2018 at 03:51 PM
Securities and Exchange Commission Chairman Jay Clayton signaled Tuesday that the agency may use the same language to describe the standard of conduct that investment advisors and brokers must adhere to when advising retail clients under the SEC’s advice-standards package.
Clayton engaged in a back-and-forth tussle with Sen. Elizabeth Warren, D-Mass., Tuesday during an SEC oversight hearing held by the Senate Banking Committee.
In attempt to clear up the confusion that investors have in understanding the difference between advisors and brokers, Warren stated that one option the agency could have chosen in lieu of its Regulation Best Interest for brokers was to “make brokers subject to the same standard as investment advisors. But you didn’t do that.”
Instead, the SEC’s proposal says that brokers “have to act in the best interest of the client, but then you never define what best interest actually means,” Warren stated.
Warren asserted that investors first need to understand the difference between a broker and an advisor, and second, that the proposal must clarify “how the fiduciary standard for investment advisors is different from the best interest standard for brokers, which is something you don’t define.”
Responded Clayton: “I think we’re pretty clear on what the best interest standard, and we’re going to be clear …”
“You’re saying you do define it [best interest] in the rules?” Warren retorted.
Clayton continued: “The best interest standard as we’ve proposed means …”
Warren interrupted: “I’m sorry, is it defined in the rules?”
