October 18, 2022

SEC Issues Guidance for Advisers on Consideration of DEI Factors

According to a new FAQ, investment advisers may consider factors relating to diversity, equity and inclusion ("DEI") in the selection or recommendation of other investment advisers to clients.

SEC staff reminded investment advisers of their fiduciary obligation to make selections and recommendations in the best interest of the client's objectives. SEC staff specified that advisers may consider DEI factors in its recommendation, but that the resulting recommendation must be consistent with client objectives, the scope of the relationship and all adviser disclosures. Additionally, SEC staff clarified that an adviser's fiduciary obligations do not require restricting such a recommendation to investment advisers with certain traits, such as a minimum assets under management or a minimum length of investment tenure.

SEC Commissioners Caroline A. Crenshaw and Jaime Lizárraga applauded staff for clarifying adviser obligations, saying that the FAQ is a step in the right direction.

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