The Securities and Exchange Commission (SEC) wants to hold advisors to a higher standard. But its proposals, which are open to public comment until the middle of August, are leading to uncertainty among registered advisors.
TD Ameritrade, the Omaha, Nebraska-based discount brokerage, surveyed investment and registered advisors and found that 87% are uncertain about the proposals put forth by the SEC, reported Financial Advisor. TD Ameritrade Holding Corporation (AMTD) reportedly issued the survey results, which included responses from more than 5,000 advisors, during a policy briefing earlier this week.
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According to Financial Advisor, TD Ameritrade's managing director Skip Schweiss said at the meeting that the brokerage is analyzing the SEC proposals and working with advisors to ensure that they understand all the key points. Public comment on the proposals is open until August 17, noted the report. "There is a lot happening on standards of care these days ... and it feels to me like things may be coming to a head," Schweiss said, as reported by Financial Advisor.
In late April, aiming to reduce conflicts of interest on the part of brokerages advising retail investors and to lower investor confusion, the SEC approved a package of regulatory changes that would be a blow to brokerages but would increase the protection for some investors. Under the proposed Best Interest regulation, broker-dealers would be required to act in the best interest of customers when making any recommendations for stocks or investment strategies involving a retail investor. The SEC said that this is designed to make it clear that the brokerage can't put its interests ahead of the interests of its client.
To address confusion that investors may have as to the obligations and duties of the investment professionals they work with, investment brokers and advisors will have to provide a customer or client relationship summary via a new short-form disclosure document. The SEC said that the document – dubbed Form CRS – would give retail investors a simple, easy-to-understand way to ascertain the nature of their relationship with the broker or investment professional. The third piece of the regulation being proposed would prevent some brokerages and their employees from using adviser or advisor as part of their name or title when dealing with retail investors.
During the policy event, Schweiss pointed to titles as one area that could cause confusion among consumers. After all, brokers can't call themselves advisors or advisers, but they can give themselves the title of financial planner or wealth manager, which could confuse customers as to whose best interest they have in mind.