SEC Investment Advice Proposed Guidance in Federal Register; 90-Day Comment Period Begins

More than two weeks after releasing them to the public, the Securities and Exchange Commission (SEC) today (May 9) published in the Federal Register its proposed regulations intended to govern relationships between investment professionals and the investors they serve. Also published is a proposed disclosure to be used by broker-dealers and registered investment advisers (RIAs) in defining the scope of their relationships with clients, and a standard-of-conduct for RIAs.

This SEC guidance is seen by many as an alternative to the Department of Labor (DOL) investment fiduciary regulations and prohibited transaction exemption guidance package, which was recently vacated (nullified) by a U.S. appeals court. (The DOL provided interim guidance this week advising standards of conduct until further notice is provided by the DOL.) Opponents of the DOL’s fiduciary investment advice guidance had long argued that it is more properly the province of SEC to regulate investment advising relationships, including advice given to retirement savers.

Under the proposed SEC regulations, broker dealers would be required to put investors’ interests before their own. In addition, the proposal clarifies the SEC’s views on the fiduciary duties and standards that investment advisers owe their clients. The regulations also aim to clarify investor confusion about their relationships with investment professionals, and propose to restrict some broker-dealers and their associated financial professionals from using the term “adviser” or “advisor” as part of their name.

Public comments will be accepted for a 90-day period beginning with today’s publishing. See the Ascensus Washington Pulse for analysis of the SEC guidance.