June 2019 – The SEC’s Efforts Fall Short

As we described last month retail investors have long been confused and ill served by differing service models and regulations that apply to broker dealers and to Registered Investment Advisers. As we anticipated the Securities and Exchange Commission (SEC) in early June issued new measures in early intended to address this matter (see the enclosed article on page 42 for details).

SEC Chairman Jay Clayton introduced the new rules by stating “The rules and interpretations we are adopting today address issues that the Commission has been actively considering for nearly two decades.” Those efforts have, in large part, been focused on establishing a uniform standard of conduct expected of registered investment advisers and broker-dealers, despite the fact that these are two distinctly different business models subject to distinctly different rules and regulations.

While we are not surprised, we are disappointed by the new rules. The fundamentals of these two financial services models by regulation and through decades of industry practice remain unchanged: investment advisers serve as fiduciaries to their clients and broker-dealers are market intermediaries who sell products to investors. Simply stated, Regulation Best Interest is intended to raise the standard of conduct by BDs and their registered representatives. The effort, purportedly, was to establish parity between the historic and ongoing standards of conduct required of RIAs and the standards that apply BDs. In that respect these newly minted obligations are, at the very least, misleading. Unfortunately, we believe the new rules and the related hype will only serve to further confuse retail investors.

Despite these shortcomings, you should take comfort that our standards have not changed in the least. We remain fiduciaries to our clients and will continue to serve their best interests. For our readers who are not currently our clients, we will continue to provide information that will enable you to serve your own best interest by providing unbiased information and analysis consistent with the mission of our parent organization, the American Institute for Economic Research (AIER).

Also in This Issue:

New Rules for Broker-Dealers
Price Inflation: Why it Matters and . . . where is it?
Rising Prices: Dealing with the Unexpected
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow-Jones Industrials Ranked by Yield
Recommended Investment Vehicles

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