US proposes rules for brokers’ fiduciary duty
WASHINGTON — Brokers who manage Americans’ retirement accounts may soon be required to put investors’ interests first under new restrictions proposed by the U.S. government.
The Labor Department on Tuesday opened the rules to public comment for 75 days. The Obama administration has put its weight behind the move. Against a backdrop of intense opposition from the financial industry on an earlier proposal, administration officials took pains to reassure the industry that the new framework wouldn’t end the way brokers do business or prohibit them from receiving commissions or other fees.
The proposal would provide “guardrails but not straitjackets” for protecting Americans’ retirement investments, Labor Secretary Thomas Perez said in a conference call with reporters.
The changes would put brokers — who sell stocks, bonds, annuities and other investments — under the stricter requirements for registered financial advisers.
Fierce debate and lobbying over the proposal is expected.
The stricter rules could alter the types of investments a broker recommends to you for your retirement account. And a broker will have to tell you when they have a conflict of interest regarding a financial product — like receiving fees — that could prevent them from putting your interest first in recommending it.
A legally binding contract with customers would require brokers to act in their best financial interest. Officials said brokers would have “flexibility” in how they’re paid, so long as they exercise a fiduciary duty toward their clients. If an investor believed their broker or investment adviser violated the contract, he or she would be entitled to pursue action in arbitration.
Fiduciaries, such as doctors or lawyers, are obligated to put their clients’ interests first.
Brokers buy and sell securities and financial prod-
MANCHESTER, N.H. — Gov. Chris Christie, testing the waters for an expected 2016 presidential run, proposed pushing back the age of eligibility for Social Security and Medicare for future retirees on Tuesday as part of a plan to cut deficits by $1 trillion over a decade, an approach he said would confront the nation’s “biggest challenges in an honest way.”
In a speech in New Hampshire, site of the first presidential primary, the New Jersey governor also proposed reducing Social Security benefits in the future for retirees earning more than $80,000 a year and eliminating them for those with annual incomes of $200,000 or more.
He also said that seniors who work after age 62 should be exempt from the payroll tax. ucts on behalf of their clients. They also can give financial advice, with one key requirement: They must recommend only “suitable” investments based on the client’s finances, their age and how much risk is appropriate for him or her. So they can’t pitch penny stocks or real estate investment trusts to an 85-year-old woman living on a pension, for example. But brokers can nudge clients toward a mutual fund or variable annuity that pays the broker a higher commission — without telling the client. Brokers don’t have to disclose that potential conflict of interest.
Registered investment advisers, on the other hand, are fiduciaries, considered by law to be trustees for their clients. That means disclosing potential conflicts as well as fees they receive and any previous disciplinary actions against them.