WASHINGTON, D.C. (August 27, 2018) – The North American Securities Administrators Association (NASAA) submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) expressing support for the agency’s work to raise the standard of care for broker-dealers. NASAA encouraged the SEC to make significant revisions to its April 18 Regulation Best Interest and related proposals (Reg BI) before adopting them in order to best serve the interests of investors.
“NASAA especially appreciates Chairman Clayton’s leadership in advancing this important regulatory priority,” said NASAA President and Alabama Securities Commission Director Joseph P. Borg. “Given our members’ shared responsibility with the SEC for oversight of the firms and individuals that will be impacted by the proposals, NASAA is anxious to work closely with the Commission on further refinements to the proposals and we hope our constructive comments are well received and considered fully.”
Reg BI is intended to establish a standard of conduct for broker-dealers and their agents akin to the fiduciary duties owed by investment advisers and investment adviser representatives. The SEC’s rulemaking proposals also include new potential disclosure obligations, restrictions on the use of certain names or titles, and an expression of the SEC’s views on the scope of advisers’ fiduciary duties.
“We believe the Commission’s approach of raising the standard for broker-dealers, while not weakening the current standard applicable to investment advisers, is the correct one,” Borg wrote in NASAA’s comment letter.
Borg said NASAA supports the proposal’s effort to address conflicts of interest, improve fee transparency, restrict the use of potentially misleading professional titles, and clarify investment adviser conflict of interest obligations. While the SEC’s proposals represent a good initial step, “significant improvements are needed in order to promulgate final rules that will serve the best interest of investors as the Commission intends.” For instance, broker-dealers should be required to consider a broad array of products when making recommendations and take into consideration factors such as product cost, liquidity, and risk as part of their recommendation.
Given the proposals’ importance to investors, NASAA cautioned the SEC to be deliberate as it proceeds through the rulemaking process. “It is more important that the proposals be implemented appropriately than that this be done quickly,” Borg said.
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Bob Webster | Director of Communications