The Regulation Best Interest is a new rule proposed by the SEC which requires stockbrokers to disclose any conflicts of interest via a “new relationship summary” form. This regulation also bans any contests between brokers and dealers that offer sales-based rewards.
This rule was proposed by the SEC over a year ago and was finally approved in a 3 to 1 vote earlier this month. Initially, this regulation was opposed by investor advocates who stated that broker innovation and drive may be stifled by the confinement. However, supporters from the broker and dealer side expect the regulation to improve the current process and standards of the industry.
SEC Chairman, Jay Clayton, stated that previous regulations for this industry were not strict enough to protect investors. He also noted that the new rule should not affect innovation in this space. “You do a good job managing money, you should get paid,”, he explained.
With the Regulation Best Interest set to become effective within 60 days of being published in the Federal Register, it is expected that stockbrokers will be forced to be more truthful with investors than compared to previous standards. “We’re raising the standard of conducts for broker-dealers,”, stated Clayton. He added, “You’re going to have to be very candid with your investor.”.
However, with 43 million American households participating in a retirement or brokerage account, there are many critics who believe that these new regulations are still not strict enough to adequately protect investors.
Whether or not this new regulation will be effective in protecting investors from fraudulent acts remains uncertain. For now, we can only hope that investor protections will improve and that new standards will pave the way for fair and unbiased investment advice.
To learn more about this regulation or different types of fraud, visit the Newman & Shapiro Whistleblower Help Center and blog!