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States sue SEC, claiming investors are left behind by new rules

Key Points
  • The states say the SEC is putting investors in jeopardy by relaxing rules for brokers
  • The lawsuit asks a judge to order the agency to scrap new rules that weaken protections for consumers
  • The states say bad investment advice leaves consumers with less money to spend, thus hampering tax collection efforts
The U.S. Securities and Exchange Commission in Washington, D.C.
Adam Jeffery | CNBC

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 for brokers.

The lawsuit filed Monday in Manhattan federal court asks a judge to order the agency to scrap new rules that weaken protections for consumers.

A message seeking a response was left with the SEC Tuesday. The states say they are harmed because bad investment advice leaves consumers with less money to spend, and thus they collect less in taxes.

New York Attorney General Letitia James says in a release that new rules let broker-dealers consider their own interests when recommending investments. She says that favors "Wall Street over Main Street."

Other state plaintiffs include California, Connecticut, Delaware, Maine, New Mexico and Oregon.