In contrast, critics argue that brokers who provide advice should indeed be required to register as investment advisors and provide fiduciary-level advice—a requirement that the securities industry has effectively lobbied against in person and in court for years.
Even without the ongoing monitoring obligation, however, brokers still have a responsibility to apply the rule’s new “care obligation” to any series of recommended transactions (it’s called “quantitative suitability”), irrespective of whether a broker-dealer exercises actual or de facto control over a customer’s account, the SEC chairman said.
“This enhancement will allow us to bring enforcement actions against broker-dealers engaging in misconduct over the course of a relationship more efficiently and thereby return money to harmed retail investors more quickly,” Clayton maintained.
The SEC chairman also shared some advice for consumers: “This is an important decision, and I urge you to do your homework and consider it carefully. For example: What types of services do you want? Do you want someone managing your account on an ongoing basis or do you want recommendations on a few stocks, bonds, mutual funds and ETFs? How do you want to pay for those services? How is the financial professional compensated and what conflicts of interest do they have?
“And if you’re not sure what to ask, try my favorite question: how much of my money is going to fees and costs, and how much is going to work for me?” Clayton told investors.
In other words: Buyer beware.