OUR THOUGHTS ON:

SEC’s Proposal at a Glance

401(k) Plans|Wealth Management

By Miles Gibson

With the fate of the Department of Labor’s Fiduciary Regulation hanging in the balance following a recent ruling by the United States Court of Appeals for the Fifth Circuit, the Securities and Exchange Commission recently proposed its own version of a fiduciary rule. Originally drafted at over 1,000 pages, the primary goal of the proposal is to, “enhance the quality and transparency of investors’ relationship with investment advisers and broker dealers while preserving access to a variety of types of advice relationships and investment products.”

The SEC’s effort to regulate the best interest of a client is broken down into three key parts for a broker-dealer to abide by.  Each of the three defined obligations must be practiced by any broker-dealer, in order to appropriately put the client’s financial best interest ahead of any other interest:

  1. Disclosure Obligation: all information regarding investment is disclosed to client.
  2. Care Obligation: investment professional makes careful effort to act in client’s best interest.
  3. Conflict of Interest Obligation: to eliminate any conflicts of interest from financial incentives, and if conflicts cannot be mitigated, clear disclosure must be made.

Along with regulating the best interest of the client, the SEC proposal clarifies the, “Advisers Act.”  In this proposal the SEC spells out the fiduciary responsibilities that must be carried out by investment advisers, when servicing their clients.

The SEC will leave the new proposal open for public comments for a 90-day period. During this time, the financial industry can offer their opinions and interpretations. Schneider Downs Wealth Management Advisors and Schneider Downs Retirement Solutions will be reviewing the proposal closely in order to provide additional insight and information over the next few weeks.

Source: https://www.sec.gov/news/press-release/2018-68

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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