Displaying items by tag: enforcement

Monday, 11 January 2021 14:11

SEC Makes a Big Move to Tighten Reg BI


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marketing rules a couple of weeks ago, that shift was largely welcomed as the previous guidelines were vague and very outdated.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.

Published in Wealth Management
Tuesday, 29 December 2020 13:23

The SEC Has Big Changes in Store for Advisors


As of last Wednesday, Trump-appointed SEC chief Jay Clayton has departed, with an interim head now in place. That means the Trump era is effectively over at the agency. It is now Biden’s turn to take the reins, and according to industry experts, that likely means two big changes. The first is the type of SEC chief he will choose, and the second is the nature of Reg BI. On the chairperson front, it is rumored that Biden with choose Preet Bharara, a former prosecutor, which would be more in line with Obama era chief Mary Jo White. This would be a departure from Clayton, who is also a lawyer, but worked on behalf of corporate clients. Secondly, the nature of Reg BI would likely change in substantial ways. “Best interest” seems very likely to be defined under Biden; and additionally, enforcement efforts will likely be stepped up considerably versus the status quo.

FINSUM: Our instinct is the SEC is going to be a totally different animal under Biden, as a definition of “best interest” and rigorous enforcement efforts would significantly change the general wealth management regulatory environment. Plus, a prosecutor as head of the SEC sort of says everything you need to know what about what the enforcement regime might look like.

Published in Wealth Management


Joe Biden and the Democrats’ plan for wealth management regulation is becoming clearer as his inauguration date draws nearer. One big question on the industry’s mind is whether Biden will completely replace Reg BI with an entirely new package. According to former SEC lawyers, that seems highly unlikely. The reason why is that doing so would take an act of Congress, a high bar. Rather, what seems much more likely is that a new SEC chief is appointed an enforcement is tightened very considerably, with the emphasis moving to strict “by the letter” enforcement rather than principles-based enforcement.

FINSUM: This would be a big change. One of the aspects that really set the Trump administration era of enforcement apart was that it would focused on following rules in principle more so that “to the letter”. While this was not unique to wealth management, it was a definite change of pace that now seems likely to reverse.

Published in Wealth Management
Tuesday, 14 July 2020 12:51

FINRA Clarifies its Reg BI Enforcement Policy


Brokers all over the country have been nervous about enforcement of the new Reg BI rule since its implementation a couple weeks ago. While the law itself is understood, enforcement of its particulars is not, as there is no precedent or real world examples to go on. For its part, FINRA recently made comments about its forthcoming enforcement policy. According to the Associate General Counsel of FINRA, “by and large, we're going to be looking at the compliance obligations of policies procedures and training, and we're not looking at it to say
‘did a firm do everything the way that we would have done it,’ or ‘did they do everything perfectly.’ We're looking to see do they understand the obligations, and do they make a good faith effort to implement the changes that needed to be made and incorporate those in their policies procedures and training.”

FINSUM: This is generally what firms have been expecting because it is what has been broadcast, but this is a little more comforting than previous efforts out of other regulators.

Published in Wealth Management

(New York)

Something very odd is happening at both the DOL and SEC. Ever since the fiduciary rule was killed by the courts earlier this year, a renewed sense of purpose seems to have washed over both agencies. While many thought complacency and a light hand would be the guiding approach of both regulators in the Trump era, somehow the opposite has happened. Now, industry lawyers say both regulators are pursuing enforcement at “epic levels of tenacity”. The focus has increasing been on the 401(k) business, but attention and activity has expanded across the board.

FINSUM: When the DOL declined to push its rule further, and the SEC stopped short of using the word “fiduciary”, most somewhat suspected there was going to be a lighter touch approach. Something has really changed.

Published in Wealth Management
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