SEC adopts retail investor protection package

The US Securities and Exchange Commission has adopted a package of fiduciary rules to protect retail investors from financial advisers who put their self-interests first.

Under the new rules called Regulation Best Interest and Form CRS Relationship Summary, retail investors will be able to make better informed decisions about financial products and easily compare services.

Regulation Best Interest requires broker-dealers to act in the best interest of retail customers when making recommendations for securities transactions or investment strategies

It intends to enhance the standards of conduct and put the financial interests of clients first when making recommendations.

The Form CRS Relationship Summary requires investment advisers and broker-dealers to provide a relationship summary to retail investors at the start of their relationship.

Firms will summarise information about services, fees and costs, conflicts of interest, legal standard of conduct, and whether or not the firm and its financial professionals have disciplinary history, typically in a question-and-answer format.

SEC chair Jay Clayton said the new rules address issues that the Commission has been actively considering for nearly two decades.

He believes the reforms will benefit retail investors and the financial markets for years to come.

"This rulemaking package will bring the legal requirements and mandated disclosures for broker-dealers and investment advisers in line with reasonable investor expectations, while simultaneously preserving retail investors' access to a range of products and services at a reasonable cost."

Advisers and broker-dealers must comply with the new rules by 30 June 2020.

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