Reprising Peirce’s “What’s in a Name” Speech

SEC Commissioner
Hester M. Peirce

Last July, SEC Commissioner Hester Peirce discussed in a speech the differences between the best interest standard within Regulation Best Interest and an adviser’s fiduciary duties. She said, in part:

In comparing the proposed Regulation Best Interest standard as well as a broker-dealer’s other requirements under the securities laws to an adviser’s fiduciary duty as described in the proposed interpretive release, only two differences stand out.  First, an adviser generally has an ongoing duty to monitor over the course of its relationship with its client, while a broker-dealer generally does not.  Second, a broker-dealer must either mitigate or eliminate any material financial conflict of interest it may have with its client.  An adviser is required only to disclose such a conflict.  Rhetoric aside, arguably proposed Regulation Best Interest would subject broker-dealers to an even more stringent standard than the fiduciary standard outlined in the Commission’s proposed interpretation.