The Securities and Exchange Commission proposed a number of measures to help minimize perceived investor confusion between broker-dealers and investment advisers. These measures include:
- adoption of a new proposed rule, entitled “Regulation Best Interest,” that will require broker-dealers when recommending a securities transaction or investment strategy to a retail client to act in the customer’s best interest. A broker-dealer would comply with its obligations if it reasonably discloses the material terms of the scope and terms of its relationship with a retail client, has a reasonable basis to believe a recommendation is in the retail client’s best interest, and has policies and procedures reasonably designed to eliminate material conflicts of interest with any recommendation;
- issue of a new proposed interpretation regarding a standard of conduct for investment advisers to satisfy their fiduciary duty to their clients; and
- adoption of a new proposed rule that would require investment advisers and broker-dealers to provide retail investors with a relationship summary, explaining differences in the types of services they offer, the legal standards of conduct that apply to each, the fees a client might pay and certain conflicts that may exist.
The rule would also prohibit standalone broker-dealers from using the terms “adviser” or “advisor” in their names or title. The SEC will accept comments on its proposals for 90 days after their publication in the Federal Register.