Stockbrokers will have to divulge their potential conflicts of interest to clients when they give them investment advice under action taken yesterday by federal regulators, the Washington Post reported. The regulation adopted by the Securities and Exchange Commission will also require brokerages to eliminate sales contests and quotas that reward brokers who generate the highest sales of certain investment products. Still, critics say that the SEC’s new measure, which the financial industry supports, doesn’t go far enough to protect investors from abuses. They say that a stricter standard that advanced under the Obama administration should apply to brokers. This standard, called a “fiduciary duty rule,” required all financial professionals, including brokers, to act as trustees who must put their clients’ interests above their own. A fiduciary standard for brokers was opposed by President Donald Trump in early 2017, and the financial industry helped defeat it in federal court. Now, under the new SEC rule, brokers will be required to disclose and in some cases reduce their financial conflicts of interest, not eliminate them entirely.
