Insured Retirement Institute (IRI) officials are encouraging the Securities and Exchange Commission (SEC) to proceed with a regulation requiring financial professionals act in their clients’ best interests.
The IRI said the SEC’s Regulation Best Interest (Regulation BI) rule provides a solid foundation for appropriate enhancements to the standard of conduct for broker-dealers and would help investors make informed decisions about the type of financial professional that would best meet their needs.
“IRI and our members are concerned that some financial professionals may still not be considering these important factors when making recommendations to their clients,” the IRI wrote. “The industry is working in a variety of ways to address this potential gap in the financial advice many Americans are receiving, and we believe this rulemaking provides an opportunity for the Commission to support and contribute to these efforts.”
Two critical factors to determine whether a material conflict of interest should be managed through disclosure alone or through disclosure plus mitigation, according to IRI personnel.
The first factor is whether a conflict is likely to impact a financial professional’s ability to make recommendations without placing his or her interests ahead of a client’s interest. The second is whether a conflict can be reasonably mitigated.
“We are encouraged by the SEC’s proposed rule and are eager to continue working with the Commission to develop a standard of conduct consistent with the principle, long supported by IRI and its members, financial professionals be required to act in their clients’ best interests,” Cathy Weatherford, IRI president and CEO, said. “We look forward to a final rule that advances investor protections while providing consumers with access to choices of important retirement products and solutions.”