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Wall Street Brokers Are Given Notice by SEC Over Conduct Rules

(Bloomberg) — Wall Street’s main regulator is putting the investment industry on notice that brokers and financial advisors must follow a uniform code of conduct in choosing what types of accounts for retail clients to open.

Securities and Exchange Commission employees said Wednesday that both types of financial professionals share comparable duties with their clients. While the rules for advisors and brokers apply at different times, “they generally result in fairly similar results in terms of ultimate responsibilities for retail investors,” officials said in a bulletin.

The guidance touches on controversial policy debates about conflict of interest rules, and what it means for brokers to act in the interests of their clients. The question has long been the subject of lawsuits and partisan bickering. During the Trump administration, investor advocates and Democrats slammed a related regulation for being too lax, fueling speculation that the SEC would replace it under Chair Gary Gensler.

Read more: Divided SEC Approved Wall Street Brokers Clash Rule

Wednesday’s bulletin indicated that the regulator is likely to keep the rule, but interpret it more rigorously. Even though they do not carry the legal weight of a rule, SEC staff bulletins are closely watched by the industry.

The document says there are differences between the fiduciary standard that applies to investment advisors and brokers’ rules – but it also stresses how the conduct requirements are similar.

Both are “crafted from key fiduciary principles, including an obligation to act in the best interests of the retail investor and not to put their own interests ahead of the investor’s interest,” SEC staff said.

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