March 1 The top U.S. securities regulator issued a long-awaited request on Friday for information that could help it determine whether to require beefed-up ethical standards for retail brokerage firm advisers.
The U.S. Securities and Exchange Commission wants data from the securities industry and the public about potential costs and benefits that could arise from changing standards of conduct that apply to giving advice to customers, according to an agency announcement.
At issue is a long-running controversy about the differences in responsibilities toward clients for securities brokers, who register with the Financial Industry Regulatory Authority (FINRA), and registered investment advisers (RIAs), another type of financial adviser that is overseen by the SEC.
While RIAs must act as fiduciaries - that is, putting the best interest of clients first at all times - brokers now need only recommend securities that are "suitable" for clients, based on factors such as risk tolerance and age. For example, they can sell a product on which they earn a bigger commission if it meets the criteria, even if an equivalent product is cheaper or has a better performance track record.
The SEC is particularly interested in economic data and other details that can help it determine the potential effects for the industry and investors of changing existing standards, according to the request. That could include everything from information about how the two types of advisers assist investors in determining the type of account to open as well as details about the "nature and magnitude" of conflicts of interest among both types of advisers.
Any changes could still be a long way off, even if the SEC eventually decides to develop rules. The SEC, at that time, could request even more information on a range of "complex considerations" related to the proposal.
The SEC will collect responses for 120 days after its request appears in the Federal Register, the U.S. government's publication for many agency notices. (Reporting By Suzanne Barlyn; Editing by Kenneth Barry)