RIA Compliance Blog
On August 3, 2022, the U.S. Securities and Exchange Commission (“SEC”) published a Staff Bulletin related to compensation incentives that may cause a conflict of interest in violation of Regulation Best Interest (“Reg BI”) rules and the SEC’s fiduciary standards for investment advisers (“IA fiduciary standard”). Reg BI and the IA fiduciary standard provide that a conflict of interest is an interest that may consciously or unconsciously incline a broker dealer or investment adviser to make recommendations or render advise that is not disinterested. According to Reg BI and the IA fiduciary standard, broker dealers and investment advisers must identify and either disclose or eliminate all conflicts of interest.
The IA fiduciary standard encompasses both the duty of loyalty and the duty of care. According to the Commission Interpretation Regarding Standard of Conduct for Investment Advisers published in 2019, the duty of loyalty requires investments advisers to at a minimum disclose a conflict of interest so that a client may provide informed consent to said conflict or eliminate the conflict entirely. The 2019 Commission Interpretation also explains that the duty of care requires investment advisers to provide advice based on a reasonable understanding of the client’s goals and objectives that is in the client’s best interest.
Continue reading ›