SIFMA Proposes “Best Interests of the Customer” Standard for Broker-Dealers

June 4, 2015
Client Alert

The Securities Industry and Financial Markets Association recently proposed that the Financial Industry Regulatory Authority amend its rules to replace the current broker-dealer “suitability” standard with a new “best interests” standard along with enhanced customer disclosure about a broker-dealer’s services, conflicts of interest, fees, and compensation. This “best interests” standard would generally require a broker-dealer to use the care, skill, and diligence that a prudent person would exercise based on the customer’s investment profile but would allow a broker-dealer to offer only proprietary or other limited ranges of products without necessarily violating the standard and would not expressly prohibit a broker-dealer from considering its own financial or other interests in making recommendations to customers.

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