Displaying items by tag: reg bi

(New York)

There are many big concerns surrounding the new Reg BI. It is considered an industry-friendly regulation, but questions abound: can we call ourselves advisors, how should we conduct rollover advice etc. The truth is that the pain and anxiety has not even really begun. Being a principals-based rule, Reg BI really won’t be understood until enforcement has begun. Therefore, it is very hard to plan for how to deal with certain questions until one feels how the SEC is behaving in practice.

FINSUM: There is a lot of uncertainty regarding this rule. In some ways, it could turn out to be very light touch, or it could be very onerous. It all depends on how it is enforced.

(New York)

The SEC’s new Regulation Best Interest (Reg BI) is causing a lot of headaches and anxiety for brokers. Particularly, brokers are worried that the new rules governing rollovers are going to end up being a trap. Reg BI does address rollovers, even laying out some (but not all) of the factors that one should be considering when recommending them. But brokers feel the rules are too vague, which could lead to big trouble. In particular, there are fears that of all the factors, cost will have by far the most weight, which could lead to heavy penalties when recommendations are viewed in hindsight.

FINSUM: In addition to the Reg BI anxiety about rollovers, there is also growing tension because everyone is expecting the new DOL Fiduciary Rule to try to grab some power in the rollover area, which means there will be new complications to deal with.

(Washington)

It feels like a complete repeat of the DOL’s fiduciary rule. With less than a year to go until implementation (June 2020), the SEC’s new Regulation Best Interest has just entered legal limbo. Perhaps even more worrying than the recent lawsuit from seven states is the fact that leading industry figure Michael Kitces’ firm, XY Planning Network, has just sued the SEC in New York to help block the rule. Kitces is trying to build on the FPA’s legacy of defeating regulators, such as it did in 2005 with the “Merrill Lynch rule”. It is highly unclear what the ultimate outcome of these suits might be, which means brokerages are having trouble committing resources to comply with them.

FINSUM: The chances that this rule gets implemented in its current form seem small, which means it that it is unwise to invest too much into compliance at this point. Everyone still has a bad taste from the money spent complying with the defunct DOL fiduciary rule.