New Rule Fails to Put the Interests of the Investor First
The following is a statement by Nora Duncan, state director, AARP Connecticut, on the Securities and Exchange Commission’s approval of the “Regulation Best Interest” and its final three-part rule on the standards of conduct applicable to financial professionals and related disclosure form:
“AARP is alarmed by the outcome of SEC’s rule-making on the standards of conduct for financial professionals. Often described as an important opportunity to protect Americans saving for retirement, the new rule does not strengthen investor protections, nor does it improve the quality of advice upon which investors rely.
“The SEC has rejected the comments of thousands of AARP members who asked for a rule that requires all financial professionals be held to a standard of conduct where the advice is solely in the best interest of the investor and shields them from conflicts of interest, hidden fees, and other losses that result when financial professionals put their own interests first. To make matters worse, the SEC has maintained the now misnamed ‘best interest’ label, which AARP’s consumer testing revealed may mislead investors into believing they are protected by a higher standard. Continuing to mislabel this new rule as a ‘best interest’ standard risks continuing to confuse and mislead consumers.
“In a surprise, the SEC’s rule instead weakens the interpretation of the Investment Advisers Act, undercutting decades of accepted practice. By removing the proposed language that required advisers to put retail investors’ interests ahead of their own, the SEC has now explicitly rejected that as a requirement.
“This rule will have a negative impact on the ability of Americans to save and invest for retirement, and we intend to immediately educate our members about its harmful changes. It is hard enough to save for retirement, and we should do all we can to make sure retirement savers are getting the advice they need. Unfortunately, this new rule fails to put investors’ interests first, and AARP stands prepared to continue to fight to protect American’s hard-earned savings.”
Since the rule was released in the spring of 2018, AARP and its members submitted more than 10,000 comments urging the SEC to protect consumers. In addition, through two rounds of usability testing, grassroots activity, social media and earned media, and at SEC roundtables throughout the country, AARP members and activists spoke out about their concerns.