This article originally appeared on Advisor Perspectives by Knut Rostad.
July 4 reminds us of how the American experiment started. That stands in startling contrast to the SEC’s experimental standards.
The rule-making standards the SEC set on June 5 was transformational. Broker-dealer (BD) sales rules replaced investment advisor fiduciary duties on the federal throne, regulating “trusted advice” for retail investors. It’s a clear power shift, years in the making, and BDs are energized. They’re wasting no time brandishing their new ascendency over RIAs.
Take John Taft, vice chairman of Baird and former chair of the Securities Industry and Financial Markets Association (SIFMA). He’s the architect of SIFMA’s July 2011 blueprint for a best interest standard and a seasoned Washington lobbyist. Taft wrote in Investment News that brokers must, “mitigate and in certain cases eliminate” financial conflicts and that “this is truly a best-interest standard with real teeth.”
Mitigation is not required by the rule. BDs are required to have policies to identify if conflicts merit mitigation. Yet, actual mitigation is only called for if, and only if, the BD itself finds it is appropriate.
Read the rest of the article on Advisor Perspectives.