Despite misgivings, SEC releases proposed rule for investment advisers
April 20, 2018 by Joe Gardyasz
The Securities and Exchange Commission voted Wednesday to release a three-pronged proposed rule for public comment that would change the standard of care that broker-dealers owe retail investors, require new client disclosures for all investment providers, and reinterpret the requirements of fiduciary advice, Benefits Pro reported.
On each of the three measures, the five-member commission voted 4-1 to release the proposals to the public, with Commissioner Kara Stein, a Democrat and appointee of President Barack Obama, the lone “no” vote on each proposal.
Among the three proposals is a “best interest” regulation that would require a best interest standard of care for broker-dealers that currently operate under a suitability standard. Under the proposal, brokers would be required to disclose conflicts of interest and have a “reasonable basis” that their recommendations were in clients’ best interest.
The issue is of keen interest to Iowa-based annuity issuers such as American Equity Investment Life Holding Co., which are concerned that a best interest standard would torpedo sales of annuities and expose insurers to lawsuits from investors. (Click here to read a Business Record Insider article.)
Iowa Insurance Commissioner Doug Ommen, who chairs the National Association of Insurance Commissioners “A” Committee that handles life and annuity issues, has worked with the SEC on the rule in that capacity, and is also a member of the North American Securities Administrators Association.
“I look forward to continuing to work with the SEC on this topic in my dual roles with both the NAIC and NASAA,” Ommen said in a release. “Our consumer protection rules that require insurance and investment professionals to abide by consumer-focused standards of care should help consumers choose the professional retirement security advice that is right for them.”
The SEC’s proposal could make it even more difficult for the Department of Labor to advance its embattled proposal for a new fiduciary rule governing broker-dealers, Marketwatch reported.
The Labor Department’s fiduciary rule governing investment advice to retirees, passed in 2016, was struck down entirely by a federal appeals court in a 2-1 decision in mid-March. The department’s rule, partially implemented as of June 9, 2017, was already on hold until July 1, 2019, pending an economic and legal analysis of the likely impact of the rule required by a Trump administration memorandum.
The fiduciary rule said brokers can no longer earn commissions unless they agree to a best interests contract with clients.
