Enhancing broker responsibilities to clients would "provide badly needed and long overdue protections for individuals" but the changes must be "properly implemented," the coalition wrote.
Financial advisers who register with the SEC must act as fiduciaries, or in their clients' best interests. But brokerage firm advisers, who must register with the industry's private regulator, the Financial Industry Regulatory Authority, only have to sell investments that are "suitable," based on factors such as a client's age and risk tolerance.
Brokers may earn more from some investment options they pitch to clients, something investor advocates say could motivate a broker to push a more lucrative product. Flat fees that investment advisers charge, along with the different rules they must follow, typically prevent such potential conflicts of interest, say investor advocates.
The coalition in its letter addressed points made in a July letter to the SEC from the Securities Industry and Financial Markets Association, or SIFMA, a trade group representing major retail brokerages.
SIFMA expressed support for a fiduciary standard for brokers but said using established case law and legal interpretations of "fiduciary" in the context of the brokerage industry would be "commercially impractical" because of the differences in how brokerages and investment advisers run their businesses.
While the coalition said it understands that the SEC must consider how new regulations could affect the brokerage industry's ability to earn money and sell certain types of securities, the agency should also "avoid an over-response" to the industry's concerns.
The industry, the coalition wrote in its letter, either misunderstands fiduciary law or is making an "unwarranted effort" to limit the scope of possible changes.
Other groups that signed the letter include the Investment Adviser Association and the Certified Financial Planner Board of Standards.
A SIFMA spokesman declined to immediately comment.
(Reporting By Suzanne Barlyn; Editing by Jennifer Merritt and Mark Porter)
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