Does the SEC's new interpretation of the investment adviser standard diminish it? Depends who you ask

One of the most controversial parts of the advice reform package the Securities and Exchange Commission approved last week is its interpretation of the standard of conduct for investment advisers.

But whether the SEC has diminished the fiduciary duty to which advisers must still adhere under the new rules depends on who’s doing the interpreting.

Just before he cast the lone vote against the rule package, Democratic SEC commissioner Robert Jackson Jr. said the 41-page interpretation lowers the fiduciary standard advisers must meet.

“The final guidance the majority approves today removes language from last year’s proposal stating that the law ‘requires an investment adviser to put its client’s interests first,'” Mr. Jackson said in his statement. In a fact sheet, he said the guidance instead says an adviser must not “subordinate its clients’ interests to its own.”

SEC investor advocate Rick Fleming also criticized the adviser standard interpretation.

“In my view, the new fiduciary interpretative release weakens the existing fiduciary standard by suggesting that liability for nearly all conflicts can be avoided through disclosure,” Mr. Fleming said in a statement after the vote.

Brian Hamburger, president and chief executive of MarketCounsel, a business and regulatory consulting firm, said critics of the adviser standard interpretation raised valid concerns.

“From what we’ve seen, it’s very clear the SEC has watered down the generally accepted descriptions of an adviser’s fiduciary duty,” Mr. Hamburger said. “An adviser will not be able to say she legally has to put the client’s interest first.”

But Karen Barr, president and chief executive of the Investment Adviser Association,

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