The SEC issued requests for comment on two proposals: the "retail best interest" standard for broker-dealers and a fiduciary interpretation for investment advisers. Comments on the proposed rules and interpretations must be received by August 7, 2018.

The SEC proposals would (i) require broker-dealers to act in the "best interests" of retail customers when making a recommendation of any securities transaction or investment strategy, (ii) affirm and clarify the various types of obligations that investment advisers owe to their clients and (iii) require broker-dealers and investment advisers to provide retail investors with a short-form "relationship summary."

With respect to Regulation Best Interest and the proposed relationship summary, the SEC is seeking input on, among other things:

  • proposed standards of conduct;
  • the impact on the range of services available to retail customers;
  • required policies and procedures;
  • proposed disclosure requirements;
  • additional steps to provide retail investors with critical information;
  • the proposed implementation of the requirements;
  • restriction on the use of certain titles; and
  • the estimated burden and costs of compliance.

The proposed investment adviser fiduciary interpretation also includes a request for comment as to whether:

  • federal licensing and continuing education requirements for the personnel of SEC-registered investment advisers should be implemented;
  • rules should be proposed to require registered investment advisers to provide account statements, regardless of whether the adviser has custody of client assets; and
  • SEC-registered investment advisers should adhere to financial responsibility requirements like those applicable to broker-dealers, such as capital requirements or the requirement to obtain a fidelity bond.

Comments concerning the suggested rule amendments and proposals must be received by August 7, 2018.

(For additional coverage, see SEC Proposes "Retail Best Interest" Standard for Broker-Dealers; Fiduciary Interpretation for Advisers and Cadwalader Attorneys Analyze SEC's "Retail Best Interest" and Fiduciary Guidance Proposals.)

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