The Financial Services Institute was pleased last month when the Securities and Exchange Commission passed Regulation Best Interest, a vital new rule that establishes a best-interest standard of care for all advisers on both the broker-dealer and registered investment adviser sides of the industry.
We are on record as having strongly supported such a common-sense uniform standard — to be developed and overseen by the SEC — since 2009, before Dodd-Frank became law. We applaud the SEC’s leadership in establishing a principles-based approach to protecting investors while at the same time preserving investors’ access to financial advice.
Another part of the rules package that was approved on June 5 has received somewhat less attention, but also represents a major step forward on a related and crucial investor protection issue — namely, making disclosure more effective.
The outmoded “kitchen sink” model of disclosure has not served investors’ interests effectively in the past because it buried them under an avalanche of legalese. With busy day-to-day schedules, Main Street Americans lack time to devote to studying long, difficult-to-understand disclosures and often believe the financial professional they are paying should help them understand it.
We believe that effective disclosure must start with engaging investors by speaking their language and by connecting with them through the communications channels they prefer. Our comments to the SEC spelled out this view in clear terms — and we are happy to report that the final rule largely comports with this bold new vision.
Form CRS establishes a simplified approach to helping clients more fully understand the terms of