The Certified Financial Planner (CFP) Board recently adopted a new fiduciary standard for CFP professionals to act in the best interest of their clients at all times when providing financial advice. Although the CFP Board announced that it would not enforce the new requirements until June 30, 2020, broker-dealers and investment advisers should begin considering whether or not they should take any action to help ensure that their associated persons who are CFP professionals comply with the new fiduciary standard, including:

• the specific fiduciary duties owed to a CFP’s client, including the duty to avoid or fully disclose material conflicts of interest
• considerations for firms regarding whether, and if so how, to supervise the new standard
• enforcement of the new fiduciary standard of conduct

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In completing its broker-dealer standard of conduct rulemaking, the SEC addressed important questions about the applicability of those requirements to retirement accounts. This alert provides analysis of the reach of the new requirements in the retirement market, including:

• the types of broker-dealer interaction with plan participants that fall within the reach of Regulation Best Interest and Form CRS
• how the new rules deal with the treatment of rollover advice to plan participants and IRA owners
• practical considerations regarding the distinction between “investment education” and “recommendations”

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Yesterday, in a 3-1 vote, the US Securities and Exchange Commission (SEC) adopted a comprehensive package of rulemakings and interpretations governing the standard of conduct applicable to broker-dealers providing retail investment advice and the fiduciary duty applicable to SEC-registered investment advisers. The package includes the following specific components:

• a new rule establishing a standard of conduct (captioned as “Regulation Best Interest”) for broker-dealers and natural persons who are associated persons of a broker-dealer when making recommendations to retail customers of any securities transaction or investment strategy involving securities or regarding the opening of an account;
• the Form CRS Relationship Summary, requiring registered broker-dealers and investment advisers to provide a brief relationship summary to retail investors;
• an interpretation of the fiduciary duty applicable to SEC-registered investment advisers; and
• an interpretation of the “solely incidental” prong of Section 202(a)(11)(C) of the Investment Advisers Act of 1940 (which provides an exclusion from the definition of investment adviser for broker-dealers who provide investment advice on a solely incidental basis to their brokerage activities and do not receive any special compensation for it).

Commissioners Clayton, Peirce and Roisman voted to adopt the package of rulemakings and interpretations, while Commissioner Jackson did not. The SEC has released the adopted versions of Regulation Best Interest, Form CRS, the Investment Adviser Fiduciary Duty Interpretation, and the Solely Incidental Interpretation. A compliance date of June 30, 2020 is set for Regulation Best Interest and Form CRS. The SEC’s two interpretations under the Investment Advisers Act of 1940 will become effective upon publication in the Federal Register

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