The U.S. securities industry has proposed a best interests standard as an alternative to the fiduciary standard that was put forward by the U.S. Department of Labor earlier this year.
The New York City-based U.S. Securities Industry and Financial Markets Association (SIFMA) announced its best interests standard for broker-dealers serving retail clients on Monday.
This new standard “would articulate a legal and enforceable best interests obligation; consider investment-related fees as part of the best interests standard; avoid and/or manage material conflicts of interest; and provide disclosures about material conflicts and investment-related fees to enhance transparency,” SIFMA says.
It could be articulated through amendments to the existing rules of the U.S. self-regulatory organization, the Washington, D.C-based Financial Industry Regulatory Authority (FINRA), says SIFMA.
A best interest standard for broker-dealers, the association says, should:
- apply to all investment recommendations made to individual retail customers in all brokerage accounts, not just retirement accounts;
- provide “best interests” protections for retail customers; and
- follow the traditional regulatory approach of establishing a rules-based standard, including enhanced disclosure requirements, and robust examination, oversight, and enforcement by securities regulators, along with a private right of action for investors.
“SIFMA’s best interests standard for broker-dealers is a comprehensive, investor-focused, regulatory solution that works within the existing regulatory framework,” says Kenneth Bentsen, Jr., president and CEO of SIFMA.
“SIFMA has long supported the creation of a uniform fiduciary standard for broker-dealers and investment advisers. With multiple regulators considering different approaches which could result in bifurcated standards, redundant compliance regimes and investor confusion we believe this offers a path forward,” Bentsen says.