Broker Rules

Last week the SEC approved new rules and standards for brokers. This is coming on the heels of the Department of Labor’s rule being overturned in mid-2018.

Avid readers will recall that during DOL rule’s adoption I wrote about it extensively. Here is my summary and a brief excerpt:

“[L]arge commissions and internal incentives for advisors to sell their own firm’s investments represent a conflict of interest. A true fiduciary standard has no room for conflicted advice.”

Bottom line, the DOL rule didn’t do away with conflicted advice, but rather allowed that conflicted advice to be permitted as long as it was accompanied by disclosure. Despite my disappointment with the DOL standard, I saw its adoption as a step in the right direction, and when it was overturned, I saw the SEC rule as an opportunity to overcome the DOL rule’s shortcomings. Specifically, because the SEC has purview over more types of accounts than the DOL, which only oversees retirement savings. 

Ideally, I would like to see a better definition of terms. I believe that most of the industry’s problems arise from consumers not understanding when someone is giving them financial advice and when someone is selling them a product. We don’t necessarily need more rules about product sales but rather a clear job title for professionals that act as fiduciaries and a different title for salespeople. This was my hope for the SEC. Unfortunately, this aspiration was not realized:

“Wall Street’s main overseer approved new conflict-of-interest rules for brokers, a sweeping regulatory overhaul that drew criticism from investor advocates for being too lax.”

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