Displaying items by tag: SEC

(Washington)

Any advisor will know that the SEC’s new Regulation Best Interest has been under serious fire for the last couple of months. While it initially had a relatively warm reception from industry, brokers have railed against it more recently. Now, state attorney generals are mounting a furious push. The AGs of 17 states have come together to denounce the rule and demand a revision that mirrors the standard laid out in the old DOL rule. Specifically, the groups wants Reg BI to hold broker-dealers to the same standard as RIAs.

FINSUM: The SEC probably won’t do anything about this now, but this sets the stage for a major legal challenge before the rule may actually be implemented.

(New York)

There seems to be some serious incredulity over whether Elon Musk’s tweet about taking the company private will ever come to pass. And with good reason, as it would take around a $100 bn of private capital to do so—no small feat for a money-losing company. However, Barron’s says it may actually happen. The company’s board is moving to lay out a strategic plan for how to pursue the privatization. CNBC further comments that “Tesla's board will likely develop a special committee of a smaller number of independent directors to review the buyout details”. Tesla’s share price fell 5% yesterday, apparently on doubts the plan would go ahead.

FINSUM: This is the kind of coup that someone like Musk could likely pull off. We also think it is a smart strategic play. However, given how challenging the undertaking is, we are leaning towards it not happening.

(Washington)

In what seems to have amounted to the “shot heard round the world” of financial markets, this week Elon Musk, Tesla CEO, tweeted that he may take the company private at $420 and that he already had the funding secured. As expected, this sent markets into a tizzy, with the stock gaining sharply as it moved towards the stated price. Now, however, the SEC has announced it is investigating the legality of the tweet, and is investigating the particular statements made. The SEC maintains that such a statement should have been made in an SEC filing rather than a tweet, and it wants to investigate if funding was actually secured. If not, it could mean Musk was intentionally misleading the market.

FINSUM: Musk has been on a very rocky path lately, and this SEC inquiry is not going to help. That said, the idea of taking Tesla private still seems like a good one to us.

(New York)

Be careful of sketchy deal solicitations that are floating around the market right now. Apparently there are fake securities firms, either posing as real ones or using aliases, who are soliciting deal interest in the advisor market. Many times the fake deals will cite endorsement from the SEC or other regulators, often fictitious ones (e.g. The Bureau of Financial & Protection Services). The SEC itself issued the warning to investors about the phony deals.

FINSUM: Any advisor will know these are fake and that the SEC does not endorse deals, but many clients could fall for these scams.

(Washington)

Okay, here is an honest question for our readers that we are debating internally. Did the DOL rule face more criticism, or is the SEC’s Best Interest rule taking more heat? While it initially seemed that only investor protection groups disliked the SEC’s Regulation BI, coalitions of brokers are now railing against it too. Amazingly, both brokers and investor protection groups agree—the SEC’s rule is too vague and confusing. Brokers say the rule is so vague they don’t even know how to comply, while investor groups say it is so weak it won’t change current practices (these are effectively the same argument!). “This will only serve to harm the brokerage model and limit choice for those investors who prefer the brokerage advice model”, says a broker group.

FINSUM: Honestly, we think the current iteration of the SEC rule is all but dead. The comment window closed yesterday, and we expect a serious redraft.