SEC Requires Brokers to Act in Their Clients’ Best Interests

By Scott L. Starr

June 8, 2020

The new Securities and Exchange Commission (SEC) rule that requires broker-dealers who make recommendations to their customers to act in their clients’ “best interest” takes effect on June 30, 2020.  This is a significant change in the way stockbrokers have historically done their business.

The old rule was that brokers need only make “suitable” recommendations to their clients.  Starting June 30, the brokers must at all times act in their clients’ best interests.  That new best interest rule will require the brokers to make complete disclosures about the investments they are recommending. For example, starting June 30, a broker must make it clear in writing all fees the client will be charged.  Furthermore, should a broker recommend a proprietary product that his firm has created, the broker must disclose that fact to the customer and explain the possible ramifications of the fact that the firm has sponsored the recommended investment.

The new SEC “best interests” rule has long been needed.  After all, if a broker invests your life savings, you would think he should be required to act in your best interests rather than his own.

Starr Austen & Miller has represented over 1,500 investors down through the years in making claims against their brokers, investment advisors, and insurance agents.  If you or a loved one have a potential claim against either a stockbroker, investment advisor, or insurance agent, contact us now for a free consultation.