In my June column, I weighed in on the continuing saga of what, over the years, I have termed the fiduciary wars. The Securities and Exchange Commission released a series of proposed rules on April 18. One of the rules, Regulation Best Interest, proposes that broker/dealers and their registered representatives be required to act in a retail customer’s best interest when recommending any securities transactions and/or strategies.
Regulation Best Interest doesn't define "best interest" which, when you think about it, is rather odd, because that means there's no way for anyone to know the real meaning of the central phrase of the most important of the SEC's proposals. It's like reading a headline but then finding out that there's no story to explain it. The best that can be said for Regulation Best Interest is that it's a convoluted muddle of bits taken from the existing B/D suitability standard here and pieces taken from the Department of Labor's Conflict of Interest Rule there, with some lofty-sounding fiduciary language thrown in for good measure. When Fred Reish, one of the leading ERISA attorneys in the country, says that he read the SEC proposals twice through and still wasn't wholly sure what they meant, then we're all in big trouble.