In late April, the SEC released a set of proposed rules to cover some of the hot-button issues facing the industry. The rules focused on clarifying the differences between brokers and investments advisers, strengthening the duty that brokers owe to their clients, and enhancing the disclosure that clients receive from both. While the rules are preliminary, here are a few key points to be aware of:
Regulation Best Interest
When making a recommendation, the rep must ensure the recommendation is in the best interest of the client without regards to individual or firm interests
Conflicts of interest will need to be disclosed more clearly
Potential restrictions on the use of the terms “adviser” or “advisor” by brokers but this does not apply to dually registered firms such as DFPG currently
Key point is this does not impose a fiduciary standard on brokers
Fiduciary Standard Interpretation
The SEC plans on providing guidance on what acting in a “fiduciary” capacity will mean
There will potentially be new licensing and continuing education requirements for investment advisers, similar to what is required by brokers
Investment advisers may need to obtain a fidelity bond from an insurance company similar to what is currently required of broker-dealers
Form CRS will be a new filing with the SEC required of both broker-dealers and investment advisers
It would clearly define the relationship between the broker/adviser and the client
The form would spell out any continuing obligations the broker may have with the client after the transaction is completed, for example is the broker required to monitor the account after the recommendation
This would be delivered to clients similar to the ADV that is delivered to clients currently for fee-based business
Please keep in mind that this is a proposed rule that will likely change before being published. In addition, this will likely be a long process to the finish line, so we want to thank you in advance for all patience and adaptability.
DFPG is committed to maintaining a strong culture of compliance and will be closely monitoring this as new information is provided.