Regulation Best Interest: The SEC's Proposed Fiduciary Rule

18 Pages Posted: 27 Jul 2018

Date Written: June 2, 2018

Abstract

The Securities and Exchange Commission recently issued a proposed new rule to be called “Regulation Best Interest.” The proposal is an important step toward fulfilling the goal of the Dodd-Frank Act to clarify the standards applicable to broker-dealers when they give personalized investment advice to retail customers. The proposal goes far toward a recognition that broker-dealers are fiduciaries when they give such advice. The proposed “best interest” standard on its face is a fiduciary standard, and brokers operating under it will be fiduciaries under widely recognized common law fiduciary principles. Yet, the Commission has failed to acknowledge that the proposed “best interest” standard is a fiduciary standard. This paper argues that the Commission should acknowledge that brokers are fiduciaries when they provide personalized investment advice to retail investors and should adopt a uniform fiduciary standard for both brokers and investment advisers in accordance with the Dodd-Frank Act.

Keywords: broker, broker-dealer, investment adviser, fiduciary, fiduciary standard, best interest, regulation best interest, Dodd-Frank

Suggested Citation

Fein, Melanie L., Regulation Best Interest: The SEC's Proposed Fiduciary Rule (June 2, 2018). Available at SSRN: https://ssrn.com/abstract=3217155 or http://dx.doi.org/10.2139/ssrn.3217155

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