The Massachusetts Securities Division has brought charges against Scottrade for dishonest and unethical practices related to its alleged violation of the Department of Labor’s (DOL) conflict of interest rule. In letters to DOL Secretary Acosta, Financial Industry Regulatory Authority (FINRA) President and CEO Cook, and state securities regulators, CFA is urging each agency to use its enforcement authority to prevent and punish violations of the rule. CFA expressed concern that some firms seem to have taken DOL’s non-enforcement policy during this protracted transition period as a signal that they can willfully flout the requirements of the rule, and give conflicted advice that is not in customers’ best interests, without fear of repercussions.
Additionally, in a letter to Securities and Exchange Commission (SEC) Chairman Clayton, CFA points out that as the Commission reportedly moves closer to proposing its own best interest standard for broker-dealers’ investment recommendations, the Massachusetts action provides a timely reminder of the need to include in any such standard tight restrictions on practices that encourage and reward advice that is not in customers’ best interests.