SEC Commissioner Study Links ‘Clients First’ Language to Less-Conflicted Advice
June 17, 2019 by Mindy Diamond
On Wednesday, the Securities and Exchange Commission released its final rules on industry standards of conduct, including an interpretation of an investment advisor’s fiduciary duty under the Advisers Act. One major change the SEC made from the original proposal is that it removed language from the original proposal requiring investment advisors to “put clients’ interests first.” Yet, a study released this week by Commissioner Robert Jackson Jr. found that this is the very language that most advisors use when describing their fiduciary duties.
Jackson’s office combed through more than 500,000 Form ADV brochure filings of investment advisors for the first mention of “fiduciary.” Of those who mention their fiduciary duty, a majority of firms, representing 89% of assets under management, characterized it as putting investor interests first.
“Only a small sliver of the market uses the legalese in today’s interpretation when describing the law to the investing public,” said Jackson, who cast the lone dissenting vote against the rules package. “So we know from the data that most investors are being told that their interests come first. But that raises an important concern: What if the language that advisers use to describe their conduct is not, in fact, indicative of the quality of advice investors actually receive?”
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