Fiduciary duty for brokers and investment dealers6 of 8Individual investors who get investment advice from investment brokers and dealers received a break in Dodd-Frank. Following a required study, the law authorized the SEC to hold such investment professionals to a higher professional standard."If a securities broker is providing individualized investment advice to an investor, he has to meet the same high standard of fiduciary duty that an investment adviser has," says Barr.The distinction is an important one. Under the previous standard, brokers only had to recommend investments that were "suitable." But under a fiduciary standard, they would have to recommend only investments in the best interest of their client.Unfortunately, the new rule that would make that change hasn't yet been proposed, let alone completed, according to the SEC website.More On Stock Investing:3 ways to reduce stock lossesCreate a news alert for "smart spending"« Back to Financial Regulation. Related Articles:Money market fund new rulesHow to guard against fraudHelp for mortgage scam victims11 ways to prevent debit-card fraudRelated Links:The Fed's policy toolboxHow safe is your bank?5 financial mistakesThe skinny on penny stocks advertisement
Individual investors who get investment advice from investment brokers and dealers received a break in Dodd-Frank. Following a required study, the law authorized the SEC to hold such investment professionals to a higher professional standard.
"If a securities broker is providing individualized investment advice to an investor, he has to meet the same high standard of fiduciary duty that an investment adviser has," says Barr.
The distinction is an important one. Under the previous standard, brokers only had to recommend investments that were "suitable." But under a fiduciary standard, they would have to recommend only investments in the best interest of their client.
Unfortunately, the new rule that would make that change hasn't yet been proposed, let alone completed, according to the SEC website.
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