A Focus on Sales Practices from the SEC

In a positive sign, the SEC is moving forward with consideration of a significant rule-making package that would support members of the financial services industry to act more directly in consumers best interests and to provide clear and complete communication. In a recent public statement, Securities and Exchange Commission Chairman Jay Clayton said that:

  1. Retail investors believe the right way to regulate investment professionals is to have the core obligations of investment professionals match reasonable investor expectations.
  2. Investors, particularly those who appreciate the distinctions between the broker-dealer relationship model and the investment adviser relationship model, want to maintain choice. They want to be able to select a brokerage account, an investment advisory relationship, or in some cases both.
  3. Our proposed rules will mandate a customer relationship summary that would highlight the services offered, the legal standards of conduct that apply, the fees a customer might pay and conflicts of interest that may exist. Investors have also noted that, in general, investor understanding and financial education are unfortunately far below where they
  4. Main Street investors do not want jargon from their investment professional or from the SEC. They want clear questions and clear answers. There are certain questions that I believe every financial professional should be able to answer fully and in plain language.
  5. Finally, Main Street investors have no tolerance for certain questionable sales practices such as high-pressure, product-based sales contests. In these circumstances, I do not believe it is possible for an investment professional to say with credibility that the investment professional is not putting his or her own interests ahead of the interests of the customer.

Read SEC Commissioner Clayton’s full statement here.

Insurance Bill of Rights Revisited

If the above statement sounds familiar to you, then you recall the points laid out in the Insurance Bill of Rights (click on each right to learn more):

  1. The Right to Have Your Agent Act in Your Best Interest
  2. The Right to Receive Customized Coverage Appropriate to Your Needs
  3. The Right To Free Choice
  4. The Right to Receive an Answer to Any Question
  5. The Right to Pay a Fair Premium
  6. The Right to Be Informed
  7. The Right to be Treated Fairly and Respectfully
  8. The Right to Full Disclosure and Updates
  9. The Right to Quality Service and Fair Handling of Claims
  10. 10.The Right to Change or Cancel Your Coverage and Be Notified of Any Change

In light of the continued convergence between the insurance and financial services world as a whole, the Insurance Bill of Rights is being revised to be a Financial Integrity Pledge for the financial services industry as whole. The Financial Integrity Pledge will be released shortly.

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