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October 19, 2020 at 09:51 PM
Securities and Exchange Commission Chairman Jay Clayton said Monday that he was “cautiously satisfied” with Regulation Best Interest but noted that three months after its enforcement date he’s noticing some troubling trends.
Reg BI was “overdue — we needed to do this,” Clayton said during a question-and-answer session with Ken Bentsen, CEO of the Securities Industry and Financial Markets Association, during SIFMA’s virtual yearly meeting.
Bentsen queried Clayton on what the SEC has learned from three months of enforcing the rule. “We needed to raise the standard of conduct for brokers,” Clayton said, “but what we’re seeing is a lot of things.”
The dual-hatted professional — the investment advisor/broker-dealer registered representative — now subject to Reg BI “is finding out that while the compensation models are different, and BI has an enhanced disclosure around commissions and the like, … overall the standard that you owe your customer is very much the same,” he explained.
“You’re seeing that in the dual-hatted professional … in the disclosure, and that’s frankly what we want to see. You know your customer, you have policies and procedures to ensure that the products are correct for the customer — that there’s disclosure — and that you’re not putting your interests ahead of the customer’s interests,” Clayton added.
With Reg BI, “It’s going pretty well. We now have a fair amount of … harmonization across the customer experience — whether you’re in a commission model or a fee-for-service model,” he said.
“We both know there are some products where a commission model is much better for the customer than an annual fee-for-service model, including in this low interest rate environment,” Clayton said.
