Proposed Best Interests of the Customer Standard for Broker-Dealers
SIFMA’s “Proposed Best Interests of the Customer Standard for Broker-Dealers” is a comprehensive, investor-focused, regulatory solution that works within the existing regulatory framework. For over six years – predating the passage of the Dodd-Frank Act – SIFMA has strongly supported SEC action to establish a uniform fiduciary standard for broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers. SIFMA supports 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.
Proposed Best Interest of the Customer Standard for Broker-Dealers (Preamble)
1. For over six years – predating the passage of the Dodd-Frank Act – SIFMA has strongly supported SEC action to establish a uniform fiduciary standard for broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers. To this day, SIFMA continues to strongly support Securities and Exchange Commission (SEC) action under DoddFrank § 913 and we will continue to work with the SEC to achieve that goal.
2. In the meantime, however, SEC Chair White has stated, most recently in her March 24, 2015 testimony before the House Financial Services Committee, that SEC progress under Dodd-Frank § 913 will take time and will not be accomplished in the near term.
3. Even more recently, on April 14, 2015, the Department of Labor (DOL) re-proposed its definition of who is a fiduciary under ERISA, and created a “best interests” contract (“BIC”) exemption for, among others, brokerdealers who service IRA accounts.
4. The DOL re-proposal would create, among other things, an additional standard of care that would apply only to recommendations made by brokerdealers to retail customers in retirement accounts (and not to recommendations made in any other brokerage account). As a result, SIFMA believes the DOL re-proposed standard, with its applicability limited to tax deferred retirement accounts, would likely add to investor confusion, and result in regulatory duplication and inefficiency.
5. SIFMA shares the collective interest in enhancing investor protections; however, we believe it should be accomplished by establishing a uniform best interests of the customer legal standard for broker-dealers that applies to all retail brokerage accounts. We believe this goal could be accomplished in a manner that is consistent not only with SIFMA’s historical position and § 913, but also with the best interest standard set forth in the DOL BIC, and without certain conditions and requirements currently contained in the BIC.