Displaying items by tag: best interest

(Washington)

The meme stock frenzy is one of the best things that could have happened to broker reps. Why is that you might ask? Because it probably just distracted the new leadership of the SEC for about a year. The meme stock frenzy has dominated headlines and become a Democratic cause, which means newly nominated SEC chief Gensler will likely be focusing on that immediately upon taking over. Bitcoin is another emerging issue given the huge run-up in prices and public focus. Reg BI is obviously very important, but may become second fiddle because of the other, more newsworthy issues.

FINSUM: This makes perfect sense. It seems likely that the SEC might not move as fast in Reg BI changes because of Robinhood/meem stocks. As evidence of this, look no further than Reg BI hawk Barbara Roper, who has recently been talking more about Robinhood.

(Washington)

President Biden wasted no time in appointing a new Department of Labor chief. He has named Martin Walsh as Secretary of Labor. Walsh is currently the mayor of Boston and his history offers some insights into what his agenda may be. The Democrats have made very clear that one key component of their agenda is to undue the current DOL 2.0 rule and revamp it with a much stricter Obama era-like rule. That said, the naming of Walsh slightly complicates that picture. He was a union leader in Massachusetts and Biden has celebrated that Walsh is the first union member to lead the DOL in over half a century. Therefore, most think his immediate focus will be on workers’ rights issues and the gig economy rather than on wealth management.

FINSUM: It is hard to say how this will play out, but the naming of Walsh certainly makes it seem like a new rule may be slower in coming than some have feared.

(Washington)

The general understanding among wealth management regulatory experts has been that the Biden administration was not overly likely to overturn Reg BI. However, that faith might be waning in the face of some developments out of Congress. The House Financial Services Committee, led by Maxine Waters, has been adamantly pushing for Biden to completely overturn the rule and bring in new legislation. To this point, most thought Biden would simply install a new SEC chair that would become a stronger enforcer of the rule rather than trying to write an entirely new one. And with the name of former prosecutor Preet Bharara as the rumored next head of the SEC, the focus on enforcement makes sense.

FINSUM: We wonder to what extent Biden might reward his Democratic allies in Congress by pushing an agenda that writes an entirely new rule. On the one hand, it does not appear too farfetched, but on the other, it seems Reg BI may be way down the priority list given the pandemic.

(Washington)

The SEC just made its first big move to tighten regulations ahead of Biden’s inauguration. While the SEC did clarify digital marketing rules a couple of weeks ago, that shift was largely welcomed as the previous guidelines were vague and very outdated. The big change this week is that the SEC is beefing up its Reg BI compliance program. Specifically, it is scaling up its testing program to make sure firms are complying with Reg BI. According to a note from the SEC, “Division staff has assessed the results of its initial Regulation Best Interest examinations and now that approximately six months have passed since the Regulation Best Interest compliance date, the Division intends to begin its next phase by conducting more focused examinations … beginning in January 2021”.

FINSUM: Enforcement of Reg BI has been pretty lax to date, but this feels like a new phase is beginning. Most insiders in the business think the Biden administration’s approach will be to intensify Reg BI enforcement rather than write a new rule, so this step makes logical sense within that.

(Washington)

The election is far from decided, but the outcome may very well fall into Biden’s favor. With that in mind, it is worth considering how the industry’s regulatory agenda would change were he to become president. He would almost surely replace Jay Clayton as head of the SEC, but the bigger questions are about Reg BI, the new DOL rule, and whether his administration would seek a strong fiduciary standard. Most industry lawyers think Biden would not seek to throw out existing rules and draft entirely new ones. That would take a great deal of work and time. Much more likely, it appears, would be amendments to Reg BI. The infrastructure of the rule is such that simple tweaks could make it much more robust. Chief among those changes would be defining what “best interest” means and changing the approach to enforcement.

FINSUM: If the SEC put a wide-ranging definition of “best interest” in place and changed to stricter enforcement, you would quickly have a much more robust rule.