Brokers Should Be Banned From Saying They Have Ongoing Duty of Care to Clients, Experts Insist
November 12, 2018 by Rita Raagas De Ramos
If the SEC will hold brokers only to best interest standards at the time a recommendation is made – instead of being required to have an ongoing duty of care – the industry watchdog should strictly monitor that brokers are not marketing themselves as providing ongoing best interest advice, according to industry experts.
The SEC’s proposed Regulation Best Interest package establishes a best interest standard of conduct for brokers, interprets the fiduciary standard for investment advisors, and creates a new Customer Relationship Summary form aimed at clearly stating to clients if they are dealing with a broker or an advisor.
Among the weaknesses identified by industry and consumer groups is that the best interest standard for brokers is only applied when a recommendation is made. There’s no requirement for brokers to have an ongoing obligation or ongoing duty of care for their clients.
“Under Reg BI right now, the duty only applies to the specific recommendation even if the broker agrees to provide ongoing monitoring” of a client’s account, Karen Barr, president and CEO of the Investment Adviser Association, said at a media briefing at the Schwab Impact 2018 conference in Washington, D.C. last month. “That doesn’t make any sense to us. The duty should apply to what the broker has agreed to do for the client.”
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