Federal Register: SEC Seeks Public Input on "Best Interest" Standard and Fiduciary Interpretation

The SEC issued requests for comment on two proposals: the "retail best interest" standard for broker-dealers and a fiduciary interpretation for investment advisers. Comments on the proposed rules and interpretations must be received by August 7, 2018.

The SEC proposals would (i) require broker-dealers to act in the "best interests" of retail customers when making a recommendation of any securities transaction or investment strategy, (ii) affirm and clarify the various types of obligations that investment advisers owe to their clients and (iii) require broker-dealers and investment advisers to provide retail investors with a short-form "relationship summary."

With respect to Regulation Best Interest and the proposed relationship summary, the SEC is seeking input on, among other things:

• proposed standards of conduct;

• the impact on the range of services available to retail customers;

• required policies and procedures;

• proposed disclosure requirements;

• additional steps to provide retail investors with critical information;

• the proposed implementation of the requirements;

• restriction on the use of certain titles; and

• the estimated burden and costs of compliance.

The proposed investment adviser fiduciary interpretation also includes a request for comment as to whether:

• federal licensing and continuing education requirements for the personnel of SEC-registered investment advisers should be implemented;

• rules should be proposed to require registered investment advisers to provide account statements, regardless of whether the adviser has custody of client assets; and

• SEC-registered investment advisers should adhere to financial responsibility requirements like those applicable to broker-dealers, such as capital requirements or the requirement to obtain a fidelity bond.

Comments concerning the suggested rule amendments and proposals must be received by August 7, 2018.

(For additional coverage, see SEC Proposes "Retail Best Interest" Standard for Broker-Dealers; Fiduciary Interpretation for Advisers.)