SIFMA Proposes Its Own Conduct Standard for Brokers

Posted on June 19th, 2015 at 11:44 AM
SIFMA Proposes Its Own Conduct Standard for Brokers

From the Desk of Jim Eccleston at Eccleston Law LLC:

SIFMA has proposed its own version of an advisor conduct standard. While the Department of Labor released their own standard earlier this spring, SIFMA believes their newly-proposed standard is more workable.

In its standard, SIFMA hopes to include a “legal and enforceable best interest obligation”, add requirements to consider investment fees, avoid and manage material conflicts of interest, as well as provide disclosures on conflicts and fees.

The White House-backed DOL proposal, on the other hand, strives to curb incentives for brokers to put their clients in high-fee products that erode retirement savings. The DOL proposal also plans to give brokers flexibility in their compensation arrangement, with the signing of a legally binding contract.

SIFMA is not opposed to raising the bar for financial advisors, but suspects the DOL rule will increase broker liability risk, force brokers to move clients from commission-based brokerage accounts to fee-based accounts, and may add to investor confusion, which could result in inefficiency.

While SIFMA is confident in its new proposal, critics are not. Barbara Roper, director of investor protection at the Consumer Federation of America, simply stated, “It would have to be considerably strengthened to provide the same protections DOL is seeking to establish under its proposed rule.”

While SIFMA’s proposal could be improved, Kenneth E. Bentsen Jr, the organization’s president, believes SIFMA’s idea is heading in the right direction and could serve as a benchmark.

The attorneys of Eccleston Law LLC represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston

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