8 Attorneys General Sue SEC Over Investor Protections

Sep 11, 2019

New York, Connecticut and six other states have sued the Securities and Exchange Commission for ignoring the will of Congress and failing to protect mom and pop investors.

The federal lawsuit claims that the SEC is undermining investor protections passed by Congress in the 2010 financial reform bill. That law directed the SEC to draft rules that imposed a fiduciary duty on stockbrokers, saying that brokers had to give advice in the best interest of the investor not themselves.

The rules passed by the SEC require brokers to disclose any potential conflicts of interest, but they don’t forbid them from actually recommending bad investment advice for a commission. In their suit, the AGs say the rules actually make it easier for brokers to market themselves as trusted advisors while still siphoning investors’ money.

After the rules were passed, SEC Chairman Jay Clayton said the rules won’t increase the cost of regulation while at the same time rewarding advisors who issue good advice.