FINRA Rule 2111 defines the parameters for the suitability of an investment recommendation. Obama-era regulators, consumer advocates, and fiduciary proponents see the suitability standard as an unsuitable protection against conflicts of interest.

Under rule 2111, brokers must execute “reasonable diligence” in recommending an investment, and account for individual profiles, which “includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs and risk tolerance,” according to the rule.

One of the obligations needed to meet the suitability standard is a quantitative requirement, designed to protect against excess trading activity, or churning.

In 2016, FINRA brought 1,434 disciplinary actions against registered individuals and firms, and levied $176.3 million in fines. As a result, FINRA expelled 24 firms from the securities industry. More than 700 brokers were suspended, and over 500 prohibited from associating with FINRA-regulated firms. Nearly $30 million was returned to harmed investors.

Under the Republican proposals, which task the Securities and Exchange Commission with creating a new fiduciary standard, the suitability standard would be replaced by a best interest standard, which would include a new requirement to disclose potential conflicts of interest to clients.

Whether or not that would create more protections from conflicted advice than the suitability standard depends on whom you ask.

In a subcommittee hearing held by the House Financial Services Committee this week, Jerome Lombard, president of the private client group at Philadelphia-based Janney Montgomery Scott, said the best interest standard laid out in a discussion draft of legislation sponsored by Rep. Ann Wagner, R-MO, goes above and beyond the suitability standard.

“It clearly is a higher standard than suitability,” Lombard said. Under Wagner’s bill, the best interest standard would apply to all investment recommendations, whereas the fiduciary rule only applies to recommendations on assets in qualified retirement accounts.

Democratic lawmakers were unsatisfied with that assessment, claiming several times during the hearing that Wagner’s alternative to the fiduciary rule is a “watered down” standard that will fail to protect investors from conflicted advice.

Cristina Firvida, director of financial security and consumer affairs at AARP, criticized Wagner’s best interest standard as too vague.

“Disclosure alone is not enough,” Fivrida said of Wagner’s bill, adding that it does not go far enough in specifying how brokers can manage conflicts of interest.