The Securities Industry and Financial Markets Association (SIFMA) voiced its support for the Securities and Exchange Commission’s (SEC) Best Interest Rule for financial brokers.
The rule is designed to heighten the conduct of brokers over the current suitability standard.
“Regulation Best Interest would take the existing, well-functioning regulatory regime for broker-dealers and make it better,” SIFMA officials wrote in the statement to the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets. “In doing so, Reg BI would directly enhance investor protection and contribute to a heightened sense of trust and confidence among investors in their financial service professionals.”
The rule was discussed at the committee’s hearing last week entitled “Putting Investors First? Examining the SEC’s Best Interest Rule.”
SIFMA said the rule strengthens the existing FINRA suitability standard by saying that recommendations must be not only suitable, but also in the retail customer’s “best interest.” This means broker-dealers cannot put their interests ahead of the interests of the customer. It also said broker-dealers must either eliminate, or disclose and mitigate, any conflicts of interest. It also preserves choice and access for investors while providing protections in areas that the Department of Labor’s (DOL) conflict of interest rule looked to address.
SIFMA’s statement also points out areas where the regulation should be modified or clarified to ensure the final rule will be workable and effective.