News | 06.05.19
SEC's Broker Rule to Require Bias Disclosures; Effect on Pay Practices Unclear
Investors will soon learn more about conflicts of interest that can bias investment advice under a regulatory action that is expected to be completed today. The SEC is set to vote on Regulation Best Interest, which says brokers can't put their own paychecks ahead of a customer's needs. The SEC's plan suggested brokers could implement the best-interest standard by eliminating perks like paying disproportionately greater commissions for selling more investment products. It also said commissions should vary only for neutral reasons, such as how much time it takes a broker to evaluate an investment option. SEC officials have said they are trying to fix some compensation practices that may fuel biased recommendations. For instance, SEC Chair Jay Clayton has said perks like sales contests, used to juice sales of specific products, would not be allowed.
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