SIFMA Proposes Best Interests Standard for Broker-Dealers
Release Date: June 3, 2015
Contact: Carol Danko, 202.962.7390, cdanko@sifma.org
SIFMA Proposes Best Interests Standard for Broker-Dealers
New York, NY, June 3, 2015 –Today, SIFMA president and CEO Kenneth E. Bentsen, Jr. announced the industry’s “Proposed Best Interests of the Customer Standard for Broker-Dealers,” which, if adopted, would establish a best interests standard for broker-dealers serving retail clients. This proposal follows the industry’s long established support for such a standard.
“SIFMA’s best interests standard for broker-dealers is a comprehensive, investor-focused, regulatory solution that works within the existing regulatory framework,” said Kenneth E. Bentsen, Jr., president and CEO of SIFMA. “SIFMA has long supported the creation of a uniform fiduciary standard for broker-dealers and investment advisers. With multiple regulators considering different approaches which could result in bifurcated standards, redundant compliance regimes and investor confusion we believe this offers a path forward.”
SIFMA has long supported the securities regulators, specifically FINRA and the SEC, moving forward to establish a uniform best interests of the customer standard for broker-dealers when providing personalized advice about securities to retail customers. Any consideration by the DOL to adopt a best interests standard should be consistent with a prospective FINRA/SEC standard.
SIFMA believes that a best interest standard for broker-dealers should:
- Apply across all investment recommendations made to individual retail customers in all brokerage accounts (not just limited to IRA accounts);
- Serve as a benchmark for, be consistent with, and integrate seamlessly into, the SEC uniform fiduciary standard that ultimately emerges under Dodd-Frank, Section 913;
- Provide interim, strong, substantive, “best interests” protections for retail customers; and
- Follow the traditional securities regulatory approach of establishing a rules-based;heightened standard, including robust disclosure, coupled with robust examination, oversight, and enforcement by the SEC, FINRA and state securities regulators, as well as a private right of action for investors.
This new standard could be articulated through amendments to existing FINRA rules, as approved by the SEC, and would articulate a legal and enforceable best interests obligation; consider investment-related fees as part of the best interests standard; avoid and/or manage material conflicts of interest; and provide disclosures about material conflicts and investment-related fees to enhance transparency.
Read the full “Proposed Best Interests of the Customer Standard for Broker-Dealers.”
The best interest standard was announced at SIFMA’s DOL Fiduciary Seminar. Read Ken Bentsen’s full remarks as prepared for delivery here.