Comments on the Securities and Exchange Commission’s (SEC’s) proposed best interest standards express concern that the standards fail to impose a uniform fiduciary standard or define key terms, most notably, what is a “best interest” standard.

In its comment letter to the SEC, AARP says that the Commission’s standards of conduct rule for registered investment advisers (RIAs) and broker/dealers (BDs) “does not impose a fiduciary standard and, further, fails to define the contours of the ‘best interest’ standard. Absent a fiduciary standard, investors will continue to be vulnerable and will not receive the protections they need and deserve. AARP recommends that the Commission amend its proposal and adopt the state trust definition of best interest. A financial professional would have to make recommendations both ‘solely in the best interest’ of the consumer and with the ‘care, skill, prudent and diligence that a prudent person acting in a like capacity and familiar with such matters would use.’”

Furthermore, AARP says, “The Commission should require advisers to provide fee disclosure any time an adviser makes a recommendation for any and all types of accounts.” These disclosures should be made well in advance of the time the investor makes a trade, AARP says.

As for the proposed requirement of a new SEC disclosure document, called Form CRS, for client relationship summary, AARP says it is too complex for investors to understand. Instead, AARP says, “A short, plain language, user-friendly form—with key information, enabling retail investors to evaluate broker/dealers’ and investment advisers’ obligations to them—is essential for any disclosure to become a useful tool. We believe that the current four-page CRS forms are too long, technical and, therefore, too onerous for the average retail investor and household to process.”

With regard to a standard of conduct for investment advisers, AARP is asking the SEC to “adopt a uniform fiduciary standard for financial professionals that applies to all types of retail accounts. There is no question that there is confusion among retail investors in the marketplace as a result of standards that are not uniform and do not address the perpetually evolving universe of investment products and industry practices. The term ‘best interest’ further garners confusions and must be clearly defined.”

Echoing the sentiment of AARP, California Attorney General Xavier Becerra says that the SEC’s proposed standards leave investors vulnerable to financial advisers who will continue to put their profits ahead of investors’ best interests. The attorney general says the proposed rules fail to impose a uniform fiduciary standard, rely too much on disclosure instead of preventing conflicts of interest and leave key terms, such as “best interest,” ambiguous and undefined. Becerra calls the proposed rules “toothless.”

The Financial Planning Coalition (FPA) says that a clear fiduciary standard equally applicable to all financial professionals who provide personalized professional adviser, including broker/dealers, would help clarify the investment decisions Americans face every day. FPA says the SEC needs to strengthen its best interest standard rules in order to achieve this. As they stand, they do not help investors distinguish a salesperson from an adviser, or between those advisers who are legally obligated to act in their best interest, versus those who are not.

The Public Investors Arbitration Bar Association (PIABA) says the SEC must make 15 changes to the best interest standard proposal. Otherwise, PIABA says, the SEC “will further perpetuate the status quo of allowing Wall Street brokerage firms and brokers to peddle high cost, conflict-laded investments and investment strategies. There is an overwhelming need for a strong, investor-centric best interest standard.”

Among PIABA’s recommendations is a ban on financial incentives for brokers to sell certain products. Another is prohibition on extra compensation for selling in-house products or one product line over another. PIABA would also like financial professionals to conduct a thorough due diligence on products and for them to disclose to customers any conflicts of interest and how they are paid. PIABA also says there should be a continuing duty on the part of the broker to periodically assess a recommended investment strategy to ensure it remains in the customer’s best interest.

The American Securities Association (ASA) says the SEC’s proposed best interest rule should be passed but amended, particularly with an emphasis on making disclosures short, direct and focused on the services offered, the compensation received, and the pertinent conflicts of interest relevant to the investor’s decisions. ASA says the broker/dealers and investment advisers must disclose conflicts of interest and obtain informed consent. ASA also wants the SEC’s care obligation for broker/dealers to apply to investment advisers and for the SEC and FINRA to coordinate on standards for broker/dealers.

The Investment Adviser Association (IAA) previously commented that regulations should be more flexible and that the SEC should not impose “unnecessary and ill-fitting” broker/dealer regulation on investment advisers.

“We are concerned that ‘harmonization’ of investment adviser and broker-dealer regulation would result in an overly prescriptive, check-the-box regulatory regime that does not fit advisers’ businesses and is not consistent with the flexible principles-based fiduciary duty for advisers,” IAA tells the SEC. “Accordingly, we recommend the Commission refrain from any rulemaking in these areas.”

IAA goes on to say that “Investment advisers’ business models and activities differ significantly from those of broker/dealers.”

The Financial Services Institute (FSI) is largely in favor of the SEC’s proposals, saying in a comment letter, “while it is not perfect, we believe that the proposed rulemaking package provides a clear standard of care for financial professionals, including guidelines for managing conflicts of interest, while preserving investor access to a broad range of products and services available in the broker/dealer model.”

FSI commends the SEC for adopting a principles-based approach to the customer’s best interest, so that firms can tailor it to their business model and clients. FSI says it agrees “that a best interest standard of care should require reasonable and streamlined disclosures to ensure industry participants effectively communicate their conflicts of interest to their clients and potential clients.” FSI says it is in support of Form CRS, as it “matches many of the two-tiered disclosure regime that we have supported for the past several years.”