US SEC addresses Wall Street 'misconceptions' about conflicts of interest

WASHINGTON, Aug 3 (Reuters): The US Securities and Exchange Commission (SEC) on Wednesday published a staff bulletin that seeks to clarify how broker dealers and investment advisors must address conflicts of interest when providing advice and recommendations to investors.

The guidance aims to spell out expectations amid industry "misconceptions," an SEC official told reporters, adding that while all financial firms and professionals have some conflict, the "nature and expense" of those conflicts can vary.

The guidance specifically clarifies brokers' and advisors' obligations around disclosing conflicts of interest under the SEC's long-standing Investment Advisor Fiduciary Standard and its Regulation Best Interest rule, passed in 2019.

"The steps firms take to address conflicts of interest need to be tailored to their particular business model," an SEC official said.

"They need to be designed to prevent those conflicts of interests that are present at that particular firm from causing the firm and its financial professionals to place their own interests ahead of the retail investors' interests and thereby to violate their best interests obligation."

Firms are also expected to identify areas in their particular business where their own interests are in conflict with their customers and to think carefully about how those conflicts, if not adequately addressed, might negatively affect retail investors. Firms must determine what steps they must take to address those conflicts.

Wednesday's bulletin is designed to help firms with this process, recognizing that there is no one-size-fits-all approach.