By Katanga Johnson

WASHINGTON (Reuters), – Wednesday’s U.S. Securities and Exchange Commission provided new guidance to investment advisors and broker dealers on meeting their obligations as retail investors and adhering to agency guidelines when recommending investment products.

This guidance clarifies the obligations of advisors and brokers under SEC’s Investment Advisor Fiduciary Standard (along-standing) and Regulation Best Interest rules, which were passed in 2019.

The key issue is the amount of information that advisors and brokers should reveal in situations where there may be conflicts of interests. Although investment firms offer both advisory and brokerage accounts, the regulations governing each type of account are different. Advisors have to put the interests of clients before their own. Brokers can only recommend clients that are appropriate.

SEC wants advisors to consider cost-effective alternatives. They also want brokers to address conflict of interest.

According to an SEC official, “Firms could have significant conflicts of interest if they choose the account that makes them the most money, but not for a specific investor.”

In 2019, the Republican-led SEC approved Reg BI. This was widely regarded as a victory for Wall Street, after its 10 year battle to regulate investment advice. The Department of Labor proposed a harder proposal.

Consumer groups criticized Reg BI for being too vague in its definition of “best interest” while not addressing all conflicts, including the higher payments that brokers receive for selling products that are more expensive to trade.

Analysts stated Wednesday’s SEC measure, which is now Democrat-led, aims to close some of these loopholes.