SEC Sunshine Act

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

  • 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.

Thank You,

DFPG Compliance Team
compliance@dfpg.com