SEC Issues New Conflict Rules Amid Praise and Criticism


The U.S. Securities and Exchange Commission (SEC) approved new conflict of interest rules for brokers this past week. The regulations mandate brokers act in the “best interest” of clients. They require the financial services industry to clamp down on potential conflicts such as contests rewarding brokers for selling more securities than peers and exclusively selling their employers’ products.  

In a recent Bloomberg article, SEC Chairman Jay Clayton said his agency’s new rules will “enhance the quality and transparency” of services financial firms provide customers, especially when it comes to disclosing conflicts. 

The regulations have drawn widespread support from the industry, which claims brokers finally have rules that put clients’ interests above their own. But many investor advocates, such as the American Association of Retired Persons (AARP), claim the opposite. They say the sweeping regulatory overhaul is too ambiguous and gives brokers too much leeway. Some are considering legal challenges and have begun a public relations campaign against the SEC. 

Many politicians, mostly Democrats, have criticized the SEC’s new rules as well. Senator Elizabeth Warren, a Massachusetts Democrat who’s running for president, said the regulations will "make it easier for Wall Street to cheat families out of their hard-earned life savings.” 

The new rules critics are primarily concerned that the regulations go beyond establishing guidelines for  brokers by softening the long-standing fiduciary obligation for investment advisers. Consumer advocates argue both should be held to the same obligations, though they may have slightly different business models. 

For more on the SEC’s new rules and industry and advocate reaction, please consider reading the Bloomberg article on the subject.