Global Trustee and Fiduciary Services News and Views Issue 50

Prime, Futures and Securities Services | Financial Services Regulation 78 The proposed rules would: • Require broker-dealers and investment advisers to summarise their relationship to retail investors in a document not to exceed 4 pages. • Establish a best-interest standard of conduct for broker-dealers when recommending securities transactions to retail customers. • Restrict the use of the term “adviser” or “advisor” by broker-dealers in specified circumstances. • And require investment advisers to adhere to a new standard of conduct interpretation. The rule package consists of three parts: • A broker-dealer Standard of Conduct (Regulation BI). 1 • New disclosures for broker-dealers, advisers and dual registrants (Form CRS). 2 THE SEC’S PROPOSED RULES ON THE STANDARDS OF CONDUCT FOR INVESTMENT PROFESSIONALS: A QUICK GUIDE TO WHAT FUND MANAGERS AND SPONSORS NEED TO KNOW On April 18, 2018, the United States Securities and Exchange Commission (SEC) proposed a comprehensive rule set governing the standards of conduct applicable to broker-dealers and investment advisers that provide retail investment advice. • And a proposed commission interpretation regarding the standard of conduct for investment advisers and a request for comment on enhancing investment adviser regulation. 3 In this article, we provide an overview of how this proposed rule package could impact investment fund managers and sponsors. As we discuss, although the impacts are mostly indirect, they are likely to result in significant shifts in the marketing and distribution of investment funds. What would be required by the broker-dealer’s best-interest standard? Proposed Regulation BI would require broker- dealers and any persons associated with broker- dealers, when recommending any securities transaction or investment strategy to retail customers, to act in the best interest of retail