29 April 2018

US Corporate Law News: SEC proposes protection for retail investors in relationships with investment professionals


Flora Tsui
Associate | US

On April 18, 2018, the SEC issued proposed rules designed to enhance protection for retail investors in their relationships with investment professionals. These include the proposed implementation of “Regulation Best Interest”, under which a broker-dealer would be required to act in the retail investor's best interest when making a recommendation of any securities transaction or investment strategy involving securities. In proposing this, the SEC is attempting to standardize conduct for brokers-dealers by requiring them to disclose all key facts about potential material conflicts of interests, and to mandate that broker-dealers have a reasonable basis to conclude that investment products are in their clients' best interests. The SEC also is proposing to introduce a new short-form disclosure document to reduce investor confusion as to the nature of their relationships with investment professionals. The SEC also has proposed to restrict using the terms “adviser” or “advisor” as part of financial professionals' titles when engaging retail investors, while also requiring these broker-dealers to disclose their SEC registration status in certain retail investor communications. The proposed rules will be open for public comment for a 90-day period. For more information, see https://www.sec.gov/news/press-release/2018-68.

Flora Tsui Associate | New York