Displaying items by tag: SEC
A New Major Regulatory Threat Against Wealth Management
(Washington)
Elizabeth Warren, top Democrat in the running for the presidency, has been looming over the wealth management sector for months. She has staunchly consumer-protectionist leanings, but yesterday she made very apparent how she feels about forthcoming regulation in wealth management. Warren wrote a letter to DOL Chief Scalia warning him about the forthcoming DOL rule. “Given your past statements that the fiduciary rule ‘is a matter that ought to be addressed by the SEC,’ I am concerned that the DOL may simply copy the wholly inadequate standards of conduct framework developed by the [SEC] in its recently-finalized Regulation Best Interest (Reg BI)”, she said, continuing “Americans’ savings should never be willfully compromised by conflicted actors operating under anemic rules — but they are … broker-dealers to give clients advice that is not in their best interest”.
FINSUM: Usually one would argue that politicians don’t know much about the ins and outs of wealth management, but Warren knows much more than usual given her background with the CFP. That makes her a very significant opponent for the industry.
Fiduciary Rule 2.0 to be Lighter Than Feared
(Washington)
Over the last month or so, the biggest risk for advisors in the regulatory space has been the reemergence of the fiduciary rule. The DOL is set to release a new version of the rule as soon as by the end of this year. While this caused anxiety in itself, the most worrying aspect has been that Eugene Scalia, new head of the DOL, appeared likely to have to recuse himself from involvement in the new rule-making process because of his involvement as a private lawyer with the first version of the rule. However, government ethics lawyers have just announced that after consideration of the situation, Scalia will NOT need to recuse himself and can take part in making a new rule.
FINSUM: This is a big win for those who do not want a new DOL rule, or at least not a new one that looks anything like the first version. Consumer advocacy groups are very upset about the decision.
Court May Strike Down SEC’s Reg BI
(New York)
Regulation Best Interest could be on the verge of being struck down in court just like the DOL’s Fiduciary Rule. A consortium of state attorney generals and fiduciary advisers has brought a consolidated lawsuit aiming to stop the rule. The case was rapidly dismissed by the Southern District of New York because of a lack of subject matter experience and it will now be heard by the 2nd Circuit Court. The plaintiffs are arguing that in its current form the rule does not meet the clear demands laid out in the Dodd-Frank Act.
FINSUM: The smart money is on the SEC prevailing, but we expect this will just be an opening salvo in a long legal battle over the rule.
Original DOL Rule Seeing New Life
(Washington)
Yes, you read the headline correctly. The original DOL rule—the one vacated by the courts in 2018—is seeing new life breathed into it. We are not talking about the DOL Rule 2.0 effort being led by Scalia and company at the DOL, we are talking about the Obama era proposal. So who is bringing the new rule back, or at least proposing to do so—Elizabeth Warren. In a little covered policy release earlier this month, Warren vowed she would restore the Fiduciary Rule (1.0). She wanted to bring back “The Labor Department’s fiduciary rule that the Trump administration delayed and failed to defend in court, so that brokers can’t cheat workers out of their retirement savings”.
FINSUM: Add this to the long list of CFPB-oriented measures Warren wants to enact if she wins the election. On a separate note, it is very annoying how politicians so casually call all brokers cheaters when it is really a small sample of bad actors.
DOL Proposes New Disclosure Rule
(Washington)
The Department of Labor has just proposed a new rule for advisors. We know what you are thinking—“oh boy, another DOL rule”. However, this new one might be quite a positive development. The new rule concerns disclosure. Specifically, it is a new proposal to allow retirement plan sponsors to make disclosures electronically. It would actually make electronic disclosure the default method. The proposal also includes additional protections for participants, including standards for the websites where disclosures are made.
FINSUM: This seems on the surface like a good idea, as it saves time, money, and hassle. Industry commentators have so far been supportive of the idea, but there has not been an in-depth review yet.