New Rule to Protect Investors Has Brokers Upset

Wronged investors feel otherwise about ending abuse by brokers

There’s a new rule being proposed by the Labor Department that will help protect average investors from brokers who don’t always act in their customer’s best interest. This rule, five years in the making, has the brokerage industry concerned that Wall Street will be governed by a fiduciary standard.

While many brokers do put their customers’ best interests first, the new rule could make a difference in protecting the average investor from those who don’t. According to a recent article in the New York Times, “under current standards, brokers only have to recommend suitable investments, a requirement that permits them, for example, to recommend a more expensive fund that pays a higher commission even when an identically performing, cheaper fund would have been the better choice.”

The new rule, requiring a fiduciary standard, would require brokers and financial professionals to put their customers’ interests ahead of their own when providing advice when it comes to retirement accounts like Individual Retirement Accounts (IRAs) and 401(k)-type plans, says the article.

Why are brokers upset about the new rule if they already put their customers’ interests first?

Brokers will be required to enter a contract that states they are putting their customers’ interests ahead of their own. Brokers will be required to disclose any conflicts, try to resolve or lessen them and maintain records (a website) of how they are paid, according to the article. They will also have to charge “reasonable” compensation and detail investors’ total costs in dollars. And they see this as extra work.

Debate continues on both sides of the proposed rule, and it remains to be seen when it will be enacted. Many Republicans in Congress have vowed to block the Labor Department, but President Obama supports the proposal. Many are hoping the Securities Exchange Commission will pass a rule first. The commission has not yet made a decision.

For many retirees, the “rules can’t come fast enough.” The article quotes one retiree, who after four years of working with a broker, found she and her spouse were being over-charged in commissions and had been victims of other abusive practices. She said, “If average people like me were savvy enough to understand everything financial, we wouldn’t need to depend on brokers…I should be able to trust them to act in my best interest and not against me.”

While this rule is not yet enforceable, investors do have rights when it comes to the financial losses sustained as a result of broker misconduct. If you have suffered financial loss at the hands any investment broker or firm, you may be entitled to recover losses through securities arbitration. Have your case reviewed by an experienced securities arbitration attorney at no cost—contact Silver Law Group today. We work with investors nationwide to recoup losses caused by broker misconduct and only collect legal fees when we are successful.

For many retirees, the “rules can’t come fast enough.” The article quotes one retiree, who after four years of working with a broker, found she and her spouse were being over-charged in commissions and had been victims of other abusive practices. She said, “If average people like me were savvy enough to understand everything financial, we wouldn’t need to depend on brokers…I should be able to trust them to act in my best interest and not against me.”

While this rule is not yet enforceable, investors do have rights when it comes to the financial losses sustained as a result of broker misconduct. If you have suffered financial loss at the hands any investment broker or firm, you may be entitled to recover losses through securities arbitration. Have your case reviewed by an experienced securities arbitration attorney at no cost—contact Silver Law Group today. We work with investors nationwide to recoup losses caused by broker misconduct and only collect legal fees when we are successful.