U.S. brokers in spotlight for narrow application of best interest rule

By Staff | November 13, 2018 | Last updated on November 13, 2018
1 min read
wall street, new york city
© Marco Rubino / 123RF Stock Photo

While some industry participants and investor advocates might feel remorse that a best interest standard is no longer on the agenda in Canada, such a rule doesn’t necessarily end investor confusion about who will put their interests first.

For example, the SEC’s proposed best interest rule applies to brokers only at the time a recommendation is made—even if the broker agrees to ongoing account monitoring, reports Financial Advisor IQ.

While a broker who provides advice is deemed an advisor and is subject to the Investment Advisers Act of 1940, with an associated ongoing duty of care, an exclusion in that act “carves out that brokers should give advice solely incidental to their brokerage business,” reports Financial Advisor IQ, citing a source from Charles Schwab.

In light of the carve-out, the source doesn’t expect the SEC will revise the proposed best interest rule to include an ongoing duty of care for brokers. As a result, some industry and consumer groups suggest the SEC prohibit brokers from marketing themselves as providing ongoing advice.

To help avoid investor confusion, the SEC has previously stated that brokers will be restricted from using “advisor” or “adviser” in their titles.

Read the full story from Financial Advisor IQ.

Advisor.ca staff


The staff of Advisor.ca have been covering news for financial advisors since 1998.