States sue SEC, claiming investors left behind by new rules

Associated Press

Seven states and the District of Columbia have sued the Securities and Exchange Commission , saying the regulatory agency is putting investors in jeopardy by relaxing rules designed to ensure that securities brokers keep the interests of their customers ahead of their own.

The lawsuit filed Monday in Manhattan federal court asked a judge to order the agency to scrap a new rule that weakens protections for consumers because it violates the intent of Congress and was approved in an arbitrary and unlawful manner.

A message seeking a response was left Tuesday with the SEC.

The states said they are harmed because bad investment advice leaves consumers with less money to spend, and that therefore they collect less in taxes.

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