/SEC Releases Proposal to Enhance Protections and Preserve Choice for Retail Investors

SEC Releases Proposal to Enhance Protections and Preserve Choice for Retail Investors

WHAT HAPPENED?

On April 18th, the Securities and Exchange Commission (SEC) voted to propose a set of rules and interpretations intended to improve the quality and transparency of investors’ relationships with investment advisers and broker-dealers while protecting access to a variety of investment relationships and products.

Under proposed Regulation Best Interest, the SEC plans to interpret, reaffirm and clarify the SEC’s current view of the fiduciary duty investment advisers owe to their clients and implement certain requirements for broker-dealers.

Additionally, a new short-form disclosure document has been proposed as a tool to help investors with confusion regarding the nature of their relationships with investment professionals.  “Form CRS” would provide simplified language and information and other detailed disclosures.  This form would be in a standardized format that is (4) pages or less and would feature the following (8) sections:

  1. Introduction
  2. Description of relationships and services offered
  3. Statement of the applicable conduct standard associated with the services
  4. Fees and costs
  5. A comparison of brokerage and investment advisory services for firms that are not dually-registered
  6. Conflicts of interest
  7. Whether the firm or its registered representatives have reportable legal or disciplinary events and a contact for complaints
  8. Important questions that clients should ask (or online questions in the case of robo-advisers and online-only broker-dealers)

WHAT DOES THIS MEAN FOR ME?

Proposed Regulation Best Interest is geared toward enhancing investor protection by applying consistent standards to investment advisers and broker-dealers, including clear disclosures, exercising appropriate due care and addressing conflict of interest.  The specific obligations of investment advisers and broker-dealers would be determined based on the differences in the types of advice and relationships they provide to investors.

The proposed Form CRS would be required under Rule 204-5 of the Investment Advisers Act of 1940 (the “Advisers Act”) for investment advisers.  Advisers would be required to electronically file Form CRS on IARD along with any updates.

Fairview will continue to monitor for any updates or changes regarding this proposal.  For more information regarding how this proposal may affect you or your firm, please reach out to Fairview directly.

By | 2018-05-01T10:25:20+00:00 May 1st, 2018|Fairview Flash Reports, U.S. Securities and Exchange Commission|

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Founded in 2005 with the goal of developing streamlined back office solutions for investment advisers. Fairview is now servicing investment advisers, foundations and funds with over $185 billion in collective assets.