Mar. 19, 2023
March 19, 2023
I am a household / individual investor and I strongly support this rule proposal (S7-32-22).
To my understanding this rule aims to codify a best execution policy by the SEC for broker-dealers to abide quantify with quarterly reviews/annual board of director review.
I strongly agree with this position by the SEC. As a household investor I currently feel that the best execution rule is not appropriately covered or fulfilled by the FINRA best execution policies. This rule will strengthen the SEC's capacity as a regulatory body and provide improved guidelines to ensure enforcement. It is preposterous that the best execution rule is reliant on enforcement by self-regulatory organizations (SRO), often headed by the very firms it aims to regulate. In fact I believe it ridiculous that SROs are even a viable form of regulation, especially in the context of managing the largest group of financiers, with the greatest level of monetary influence the highest level of incentive to avoid regulation. The need for better enforcement / new policy is evident by a lack of enforcement of best execution often quoted with a lack of clear evidence broker-dealers were acting out of interest if enforced fined a minuscule amount relative to the overall benefit of the s
cheme. These claims of what I believe are wilful negligence should hopefully be reduced with additional best execution policy rules. The SEC needs to play a greater role enforcing rules on the market.
I also support the inclusion of PFOF as a conflicted transaction. This is evident in other regulatory bodies around the world including places such as Singapore another economic hub where PFOF is outright banned. The ability to pay under the table to access a large portion of the market trade prior to other market participants is as clear of a conflict of interest as possible. This not even mentioning that some of these wholesalers providing PFOF even have designated market maker access and an operating hedge fund. The other suggested conflicts of interest such executing orders as principal and providing/receiving orders from affiliates are also common sense inclusions. Conflicts of interest are important to disclose and do have material impacts on how retail investors determine broker-dealers. Conflicts of interest need to be more clearly presented and this rule helps provide some of this clarity.
This best execution policy by the SEC will increase my confidence in the market I believe add to a more fair, competitive efficient market.
Although this proposed rule is a good start, every rule the SEC passes is only as good as the enforcement that backs it. It will not matter unless the rules are enforced. I would be further encouraged to participate in the markets if I were convinced that the penalties for rule breaking were an adequate deterrent to misbehavior such as instituting fines in excess of the realized profits, revoking broker-dealer licenses, and in extreme circumstances, prison sentences.