SEC Sued by States Over ‘Watered Down’ Broker Dealer Rule (1)

New York and a half dozen other states accused the Securities and Exchange Commission of botching a final regulation that was supposed to protect customers of broker dealers from conflicts of interest under the landmark Dodd-Frank Act passed nearly a decade ago.

The states’ lawsuit, filed late Monday in Manhattan, claims the new SEC rule will allow broker dealers to market themselves as trusted advisers while giving recommendations “that siphon investors’ hard-earned savings,” according to the complaint.

The dispute relates to provisions of the Dodd-Frank Act that require the SEC to address whether broker dealers should be held to the ...