Nov 22 A key advisory committee to the U.S. Securities and Exchange Commission unanimously approved a recommendation on Friday that the agency develop tough new ethical rules for securities brokers.
The SEC's Investor Advisory Committee, established by the 2010 Dodd-Frank financial reform law, is recommending that the agency require that brokers act as fiduciaries, or in their clients' best interests.
The committee wants the SEC to develop a rule based on the 73-year-old law that investment advisers who register with the agency must follow. Brokers, who are largely regulated by Wall Street's self-funded watchdog, the Financial Industry Regulatory Authority, have been largely exempt from the law because their business traditionally hinged on taking clients' buy and sell orders, while giving only "incidental advice."
Brokers are now bound to a lesser standard, requiring them to recommend investments that are suitable, based on factors such as a client's age or risk-tolerance. (Reporting by Suzanne Barlyn; Editing by Lisa Von Ahn)