SEC Adopts Rules and Interpretive Guidance Addressing Standards of Conduct for Broker-Dealers and Investment Advisers

SEC Adopts Rules and Interpretive Guidance Addressing Standards of Conduct for Broker-Dealers and Investment Advisers


By: Jessica Forbes, Stacey Song, Joanna Rosenberg

On June 5, 2019, the Securities and Exchange Commission (the “SEC”) voted 3-1 to adopt the highly anticipated rulemaking package addressing investment adviser and broker-dealer standards of conduct. The package includes final versions of (i) the SEC's interpretation of the standard of conduct for investment advisers (“Final Interpretation”), (ii) new rules to require registered advisers and registered broker-dealers to provide to retail investors a relationship summary (“Form CRS”), (iii) a new rule establishing a standard of conduct for broker-dealers when making recommendations to retail customers (“Regulation Best Interest”), and (iv) the SEC's interpretation of the “solely incidental” prong of the broker-dealer exclusion from the definition of investment adviser (“Broker-Dealer Exclusion Interpretation”) in the Investment Advisers Act of 1940 (the “Advisers Act”).  We discuss each of the rules and interpretations below.

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