Key points from the SEC's final "best interest" rule

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On June 5, the Securities and Exchange Commission (SEC) voted 3-1 in favor of a regulatory framework enhancing the standard of conduct for broker-dealers and providing an interpretation of the fiduciary duty for investment advisers. The framework is more expansive than the vacated Department of Labor (DOL) fiduciary rule, as it covers all securities investment recommendations to retail customers rather than just those for retirement accounts.

In separately setting out the specific obligations of broker-dealers and investment advisers, the SEC is aiming to tailor requirements to the different types of services each provide in order to preserve customer choice in the industry. Although this new set of rules will increase compliance efforts for firms, it has been received positively by the industry because it provides a more uniform standard and does not include many of the most onerous aspects of the DOL rule, such as a private right of action.

Seven key takeaways from the SEC rule:

  1. Four obligation components but still no explicit definition of “best interest”
  2. Some prohibited conflicts of interest
  3. Account monitoring clarification
  4. More flexible approach to Form CRS
  5. DOL compliance efforts provide a head start
  6. No surprises for investment advisers
  7. States and the DOL continue moving forward

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Julien Courbe

Financial Services Leader, PwC US

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