Displaying items by tag: SEC

(Washington)

In an eye-opening claim, both RIA and broker advocates are claiming that state level fiduciary rules may be illegal under federal law. Both the Investment Adviser Association (IAA) and SIFMA say that at least for RIAs, Nevada and other states’ fiduciary rules are illegal because of the 1996 National Securities Markets Improvement Act, which prohibits states from imposing additional rules on SEC-regulated advisors. The IAA said “For more than 20 years, federal law has prohibited states from adopting any rules, interpretations, or guidance that would have the effect of substantively regulating SEC-registered advisors. The IAA will engage with policymakers in any state that appears to be moving in that direction”.

FINSUM: A lot of the states’ fiduciary rules don’t just stop at brokers and extend to RIAs and insurance agents. This IAA argument seems like pretty strong grounds for a lawsuit to block any/all of these.

(New York)

Morgan Stanley just put a big threat on the table, and they are not alone. The bank says that it may withdraw wealth management services entirely from states considering new fiduciary rules, such as Nevada. Wells Fargo issued a similar threat. A number of states, including Nevada, New York, New Jersey, and Maryland, are considering making their own fiduciary rules. Such rules would be a major headache to the brokerage industry as they would create patchwork rules across the country. Morgan Stanley said bluntly “Absent substantial changes to the [state] proposal, Morgan Stanley will be unable to provide brokerage services to residents of the state of Nevada”. Edward Jones, TDA, and Charles Schwab also said they would need to at least pair back offerings.

FINSUM: This is a strong move by the brokerage industry but we do not think it will work. The political mood in the states mean lawmakers would rather say “good riddance” than back off, but time will tell.

(Washington)

In what seemed an inevitable development, House Democrats are starting their push against the SEC’s Regulation Best Interest. The House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets will devote a hearing next Thursday to the SEC’s new rule proposal. The chairwoman of the committee is Maxine Waters, who was a champion of the defunct DOL Rule. Waters has commented on the SEC BI Rule that “When you have investment advisers who are not acting in [clients'] best interests but acting in their own best interests, it does not bode well for our senior investors in particular”.

FINSUM: We think the SEC BI Rule is a long way from ever getting enacted and will likely experience significant redrafting before implementation.

(Washington)

Advisors across the country are nervous about how the fiduciary rule-best interest rule saga may play out. To be honest, the situation has been growing bleaker by the week: numerous states are issuing their own fiduciary rules while the SEC and DOL both rework their original rules. This all means there is a good deal of regulation yet to come. Today, there is more reason to be sullen, especially if you are on the east coast, as Maryland has just announced plans for its own fiduciary rule. “(Financial professionals) have a fiduciary responsibility, morally, to make sure that their advice is in your best interest, but that has not been the law," said Senator James Rosapepe of Maryland.

FINSUM: State-based fiduciary rules with no federal rule, or a lighter federal rule, is just about the worst situation possible, as it will create a spider’s web of confusing and overlapping regulation with many grey areas and loop holes.

(Washington)

The SEC’s regulation Best Interest Rule appears to have backfired badly. A darling of the industry, in most senses, the rule is so convoluted and lacking in specificity that it seems to have been one step too far for the anti-DOL rule lobby. What we mean is that the rule was so poorly received, and so poorly defended by the SEC, that it can be seen as responsible for the big surge in state-level fiduciary rules that are cropping up across the nation.

FINSUM: The interesting part about this is that the SEC’s new rule, which was supposed to be the sensible solution between demands for a fiduciary standard and industry practicality, has completely undermined its own interests. The rule seems to have been so one-sided and poorly marketed, that it has only emboldened fiduciary advocates and “left them no choice”.