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April19, 2018

By: Steven E. Saltzman


In days of old, boxing matches used to be circular spaces in a crowd of onlookers, rather

than the square, roped 'rings' of the contemporary sport.  Any challenger who fancied his chances in a bout would throw in his hat— which was a more reliable way of putting oneself forward than just shouting over the din of the crowd.


Yesterday, in a 4-1 vote, the five SEC commissioners voted in support of a proposed package of rulemakings and interpretations supporting new standards of conduct for investment professionals, effectively announcing their willingness to enter the fight.


The proposed rules and interpretations are the SEC’s long-awaited response to the Dodd Frank Wall Street Reform’s directive and to the ongoing saga associated with the DOL’s Fiduciary Rule.


There is already a plethora of articles available for everyone to read about yesterday’s SEC hearing and insights on the proposals-  so I will not spend time duplicating that effort.  Rather, this post will focus on hitting the high notes of the SEC’s proposal and providing links to the relevant resources for you to review/consider.


  • The proposed package includes three components:
  1. Form CRS Relationship Summary; Amendments to Form ADV; Required Disclosures in Retail Communications and Restrictions on the use of Certain Names or Titles
  2. Proposed Commission Interpretation Regarding Standard of Conduct for Investment Advisers; Request for Comment on Enhancing Investment Adviser Regulation
  3. Regulation Best Interest (proposed Standard of Conduct for Broker Dealers)


  • Now that the SEC has voted to advance the proposals, they will be published in the Federal Register for public comments, and the SEC will accept comments from the public for a period of 90 days from the date of publication.


  • Despite the 4 to 1 vote in favor of the proposals, the commissioners’ collective reaction to the proposals could be characterized as fundamentally supportive, but with some serious misgivings.


  • As of this morning, two of the five Commissioners have posted their commentaries related to the proposed package online.  You can access Commissioner Michael Piwowar’s comments here and Commissioner Kara Stein’s comments here (spoiler alert—she’s not a fan).  An argument can be made that these commentaries are effectively proxies for the Pro and Con camps associated with the SEC’s proposed package.


  • Under the proposed package, the specific obligations of investment advisers and broker-dealers would be tailored to the differences in the types of advice relationships that they offer- and as such, are not uniform as some had hoped.


  • The proposed standard of conduct for Broker Dealers does not include a requirement to act as a Fiduciary.  Rather, the proposed standard of conduct for broker-dealers is to act in the best interest of the retail customer without placing the financial or other interest of the broker-dealer or associated person making the recommendation ahead of the interest of the retail customer.


  • The proposed interpretation of the standard for Investment Advisers asks for input on adding new requirements for personnel of SEC-registered investment advisers to include licensing, continuing education and new financial responsibilities such as minimum capital requirements and fidelity bonds.  It also as poses questions about the delivery of account statements to clients with investment advisory accounts.


  • The proposed form CRS (Client Relationship Summary) proposes to require registered investment advisers and registered broker-dealers to provide a brief relationship summary to retail investors to inform them about the relationships and services the firm offers, the standard of conduct and the fees and costs associated with those services, specified conflicts of interest, and whether the firm and its financial professionals currently have reportable legal or disciplinary events.


  • The new proposal would, under certain circumstances, restrict broker-dealers and associated natural persons of broker-dealers from using the term “adviser” or “advisor” when communicating with retail investors.


Please know that the sum total of the proposal package is nearly 1,000 pages, so it’s going to take a while to plow through it.  You can access (and download) the proposals at the SEC’s Proposed Rules page on its website.  Specifically, look for the three proposals dated April 18, 2018 (Release Nos. 34-83063, IA-4889, and 34-83062).


Since the U.S. Court of Appeals for the Fifth Circuit decision to vacate the DOL’s Fiduciary Rule in its entirety, the spotlight now squarely rests on the SEC and its newly proposed package of rules and interpretations.  That said, the DOL still has until the end of April to appeal the ruling before it becomes effective on May 7th.  And, it’s not a forgone conclusion that they will just let go of their defense.  The next eight business days could be very interesting.


Let’s get ready to rumble…


We hope that these postings are helpful.  We will continue to provide updates when relevant as important information related to this topic becomes available.


Contact Steve Saltzman with questions or comments at







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