SEC Chairman Issues Statement On Feedback From Investor Roundtables

In a statement from the SEC, Chairman Jay Clayton shared his takeaways from the feedback the Commission has received regarding the proposed rule-making package that contains Regulation Best Interest, Form CRS and a fiduciary standard.

Clayton called the cross-country roundtable series “valuable” for providing the Commission with experienced-based, candid conversations.

“We will consider these comments carefully as we develop final rules,” Clayton said.

In the statement, Clayton highlighted several takeaways from the roundtables that he said “resonated” with him.

Takeaways From The Roundtables:

1. Retail investors want to regulate investment professional’s obligations and investor expectations.

“Retail investors expect that, whether the relationship is more limited (e.g., recommending a stock or mutual fund) or more extensive (e.g., full financial planning), their investment professionals will exercise appropriate care in making recommendations and will not put their interests ahead of the interests of their customers,” Clayton said. “I believe we should move forward on this rulemaking with just that perspective.”

2. Investors want to maintain distinction between the broker-dealer relationship and the investment advisor relationship.

“Investors, particularly those who appreciate the distinctions between the broker-dealer relationship model and the investment adviser relationship model, want to maintain choice,” said Clayton.

3. The difference between broker-dealers and investment advisors is not well understood.

“This is a problem, said Clayton. “If you do not know (1) the scope of services your investment professional is providing and the related obligations, (2) the fees you are paying and (3) how the professional is compensated, your ability to ask good questions and make good choices is limited.”

To help with this, investors asked the SEC for an educational video explaining the differences between the two models.

“We intend to prepare this video,” said Clayton.

4. Investors are in favor of a revised Form CRS.

“Investors have expressed broad support for this concept, and have provided valuable feedback on how the sample customer relationship summary we developed can be improved, Clayton said. “They have focused on simplifying, clarifying and tailoring the disclosure, including through the use of graphics, and have urged us to limit or eliminate legalese, otherwise the summary will not be read.”

5. Main Street investors do not want jargon from their investment professional or from the SEC. They want clear questions and clear answers.

Clayton said that he recommends investors ask their investment professionals: “How much of my money is going to work for me?”

Chairman Clayton believes this question opens the dialogue to discuss fees and commissions and other important considerations for investors.

Investors are still invited to weigh-in on the proposed rules via the SEC website.