Displaying items by tag: SEC

The Trump administration put rules in place which forbid employers from considering social or environmental impact when it came to fund selection from enrolling in retirement plans. However, the Biden admin is turning a new leaf on this front as they have proposed a rule which will ease the decision-making process for employers if they want to add ESG funds to their employees’ retirement plans. This is yet another proposal from the Biden admin that favors renewables and green corporations in the country's transition to net zero emissions. Part of the response is a boost in demand as investors have overwhelming interest in ESG in their portfolios. It isn’t a no brainer that ESG should be a part of a retirement portfolio, as it does prepare for downside risk, but it may not outperform.

FINSUM: The U.S. 401(k) savings machine is a huge pool of investment, and institutional savings could be a major boost to ESG demand.

The DOL took a very important and surprising step today. Many advisors and the industry more generally has been calling for the DOL to delay their implementation of the Fiduciary Rule, and somewhat amazingly, that is exactly what the agency just did. Referring specifically to the rule that was passed in the final few weeks of the Trump administration, the DOL is delaying implementation until the end of January 2022. Further, it will not enforce several parts of the rule, including the rollover aspect, until June 2022.

FINSUM: So the month extension isn’t that big, but will give some firms more time to get their matters in order. The bigger question is when the new Biden era DOL rule be implemented.

Former Harvard bankruptcy professor Elizabeth Warren is trying to reestablish support of tighter regulation on yet another financial industry sector. Looking to alleviate financial irresponsibility, the bill restricts PE from enforcing new loans on companies in order to withdraw dividends. Additionally, the bill creates a number of protections for workers that prohibit outsourcing and secure severance pay in the event of bankruptcy. Companies like Sports Authority, Shopco, and Gymboree all filed for bankruptcy under PE the debt Warren is trying to prohibit. Warren failed to draw the appeal across the aisle previously with the bill, but is hoping to gain more traction this time around. Opponents say the bill will draw down on private funding for new and small businesses and could harm the ability to make new hires or expand their workforce.

FINSUM: Regulation like this will undoubtedly harm some small businesses but the protection and benefits could out way those restrictions, however the bill won’t likely get enough traction in its current status to reach the oval office.

(Washington)

The SEC’s Investor Advocate has pointed out that Reg BI is under threat. Some of the developments in the market have meant that Reg BI may be rendered useless. In particular, the increasing use of “nudges” in trading inevitably rubs against the fundamental meaning of Reg BI. If trading platforms for retail investors are constantly using “nudges”, or encouragements to trade, how much does that constitute a recommendation? That is the esoteric question that the SEC must address. According to the SEC’s Investor Advocate, Rick Fleming, “In my view, it appears that the use of certain DEPs, by gamifying securities trading for retail customers, could significantly influence these retail customers’ investment decisions in ways that were not fully contemplated when the commission adopted Reg BI with its important distinction between solicited and unsolicited trading.

FINSUM: Reg BI is only a couple years old and it is already antiquated!

(Washington)

Advisors have been paying very close attention to Reg BI. This is especially true because the Biden administration looks poised to make a number of changes to the rule, including defining “fiduciary” and bolstering enforcement. However, that appears to not be all as the SEC may be set to make an addition to Reg BI: a new section covering the gamification of trading. The SEC’s Investor Advocate, Rick Fleming, says that “N]ow it seems that most if not all of the on-line discount brokers are influencing investor behavior with digital engagement practices, which further blurs the line between providing investment advice and traditional brokerage service … At some point, if the Commission fails to brighten the distinction between advisors and brokers, it will make little sense to regulate the two with such distinct regulatory models.”.

FINSUM: Critical changes to definitions, much heavier enforcement looming, and now a pandora’s box on gamification. And this might be just the beginning.