This article originally appeared on Investment News.

Conflicts of interest are a threat, but some regulators don’t seem to see the need to restrain them.

The coronavirus is rightly consuming public attention. It’s unprecedented and a mortal threat. It’s also a reminder of a virus far closer to advisers, a virus that most in the industry and many regulators seem to believe need no containment at all.

In October 2012, Carlo V. di Florio, then director of the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations, spoke on “A topic of perpetual importance to all aspects of compliance and ethics programs, conflicts of interest.”

Di Florio looked at history, ethics and securities laws and offered a metaphor, especially meaningful today for why conflicts of interest demand respect: “One can think of ethical concepts as the white blood cells that make an organization’s “immune system” … effective. Conflicts of interest can be thought of as the viruses that threaten the organization’s wellbeing. As in the microbial world, these viruses come in a vast array of constantly mutating formats, and if not eliminated or neutralized, even the simplest virus is a mortal threat to the body.”

“Especially when combined with the wrong culture and incentives, conflicts of interest can do great harm,” he continued.

That was then. On June 30, SEC rule-making on broker standards, its Form CRS and the CFP Board’s new standards will begin to be enforced. The two sets of standards are striking for their similarities.

The SEC release and the CFP Board standards take a very different tact and diminish the harms and risks of conflicts.

The legal and business differences between advisers and brokers are essentially ignored. The adviser, in a relationship of two, has a fiduciary duty to clients. The broker, in a relationship of three, has business obligations to and receives incentives from issuers to sell products, and also has a duty to keep customer recommendations suitable.

Each set of standards rejects a premise of the Advisers Act of 1940 and seeks to avoid the constraints placed on advice by legal precedent and commonsense. Each seems to seek to transform standards and to rebrand conflicts. In 2020, conflicts are treated more like the common cold than a deadly virus.

An example? That advisers and brokers, and their conflicts – whether they involve opaque sales commissions or transparent fees – are all treated pretty much alike. But for some sales contests, conflicts need not be avoided. Conflict elimination is not even urged. The implicit resounding message: Conflicts are okay.

Reg BI sets out what brokers should do on disclosure, care, conflicts and compliance. About conflicts, the proposal notes, “We did not mandate the absolute elimination” of any “particular conflicts.” The reason? “We were concerned that the absolute elimination of specified conflicts could mean a broker-dealer may not receive compensation for its services.” (Page 347)

In Form CRS, brokers and advisers and their conflicts appear the same. Advisers and brokers are described as largely indistinguishable. This is seen in the required language for a dual registrant:

“When we provide you with a recommendation as your broker-dealer, or act as your investment adviser, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the recommendations and investment advice we provide you.”

Meanwhile, the Certified Financial Planner Board of Standards Inc. also diminishes the importance of conflicts. Advisers and brokers and their conflicts are treated much alike. The CFP Board starts from the premise that fiduciary duty is “business model neutral” and then implies that fee and commission compensation are similar. Most recently, the CFP Board erased the compensation method screening tool from its website. Further, it argues that CFPs should not be urged to avoid conflicts. Each premise is questionable and can be confusing to CFPs and consumers alike.

Of course, the CFP Board can change course, and June 30 is an important milestone. Several concrete steps could be taken to reflect a more somber view of conflicts and bolster the board’s stock. There’s still time to note that di Florio is correct and conflicts should not be treated like a common cold.

Coming to terms with the coronavirus took time. Near Washington, only days ago containment measures were modest. On Friday, March 13, restaurants bustled; by Monday they were closed. The reality of corona hit. Its implications took hold. Thankfully.