(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.

Published in Wealth Management
Wednesday, 08 August 2018 09:20

SEC Rule Might Be Close to Death

(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.

Published in Wealth Management
Wednesday, 01 August 2018 08:59

Brokers Panicking as SEC Rule Echoes DOL

(Washington)

The US broker community is currently growing increasingly concerned about the SEC’s new “Regulation Best Interest”. On top of anger over the rules governing the use of titles, brokers have become increasingly worried about a part of the SEC rule which essentially mirrors the DOL’s best interest contract exemption (BICE). The problem is that there are rules governing conflicts of interest that are very similar to the DOL’s, such as brokers having to take steps to resolve conflicts, and minimize compensation incentives for certain products. According to one lawyer representing brokerages, “We believe the commission should replace the DOL rule-based preamble provisions on mitigation and elimination of conflicts with a simple principles-based statement”.


FINSUM: When the rule was first debuted, the general industry reaction was positive. However, the more everyone has dug into it, the more stringent the opposition has become.

Published in Wealth Management

(Washington)

The SEC best interest rule has been facing a very tough time. All sides of the argument seem to be against it. Consumer protectionist groups hate the muddled and weak delineating between brokers and advisors, while the industry dislikes the strong rules on title use. Now, there is a new weak spot in the SEC’s approach. The SEC has decided to have “roundtables” with consumers to discern their level of understanding of the rule and get feedback. The move is unusual and the SEC has not disclosed who or how they will do it. All sides again hate this idea, with the head of the Consumer Federation of America saying “Asking investors whether they like the disclosures is virtually meaningless … That needs to be done by disclosure testing experts who know how to design the tests and interpret the results”.


FINSUM: It is very obvious that the SEC’s current poorly defined delineation between brokers and advisors is not going to be easy to understand for consumers. We suspect any kind of consumer testing will help them realize that, but this does seem to be a rather odd and opaque approach.

Published in Wealth Management
Friday, 13 July 2018 10:11

The SEC Rule is Doomed

(Washington)

Everyday it seems less likely that the current SEC best interest rule, “Regulation best interest”, will make it through to implementation in anything near its current form. Not only has the industry complained about its governing of titles, but many say the rule’s complex grouping-but-delineation between brokers and advisors just doesn’t make sense. Now, the group of advocates that succeeded in bringing down the DOL’s fiduciary rule have officially turned their sights on the SEC rule. The group, called NAIFA, says it supports a best interest standard, but vehemently protests the restriction on the use of titles.


FINSUM: We commiserate with the SEC because we understand the logic they used to make this rule, but we do feel the current iteration is doomed.

Published in Wealth Management
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