Displaying items by tag: reg bi

Tuesday, 04 January 2022 10:12

SEC Warns of Surge in Reg BI Enforcement

Brokers better look out, the SEC has started the new year with a bang. The Commission has mostly been quiet about its potential Reg BI changes since the rule went into effect about 18 months ago. However, a big new warning has come out from Quinn Emanuel’s SEC enforcement practice. There are “strong indications” of much more robust enforcement coming. According to Kurt Wolfe of the SEC Enforcement Practice, “SEC Chair Gary Gensler is under pressure from broad constituencies to show results in the space. For example, at a recent hearing of the Financial Services Committee of the House of Representatives, Rep. Carolyn Maloney (D-N.Y.) encouraged Chair Gensler to ‘take further action to strengthen this rulemaking,”. Further, “the SEC has signaled that regulated firms may not be getting Reg BI right, and senior SEC officials have made it clear that they intend to take an expansive, perhaps aggressive, approach to Reg BI.”

FINSUM: Since Biden took office it has really only been a matter of time until enforcement scaled up. It is now clear that it is coming.

Published in Wealth Management
Wednesday, 29 December 2021 22:50

How New Regulations Will Steal Assets from Advisors

The 2019 Secure Act paved the way for types of assets to be added into 401(k) plans by limiting the legal liability of partners. Since then it’s been a series of new companies announcing the addition of annuities to retirement plans. However, this is a huge chunk of money in the form of a deferred income that advisors won’t necessarily be managing. A growing number of advisory firms are concerned as large amounts of traditional investment being managed by advisors will now be tied up in annuity contracts. A peek behind who the major lobbyist for 2019 secure reveals its mainly insurance companies limiting their liability and existing retirement vehicle supporters like Fidelity. Finally, this could be bad for clients as many institutional investors can get better deals on annuity prices for their clients.

FINSUM: While the care act will undoubtedly affect annuity demand, it could adversely affect advisors in their client’s retirement future.

Published in Wealth Management
Monday, 20 December 2021 18:26

SEC Launches New Industry Crackdown

The Security and Exchange Commission just issued a slew of new regulatory changes that would impact current trading standards. New changes could come into vote if they have majority support among the five commissioners and two others. Chairman Gensler stated he wants the public and markets to have fair material information. Essentially there is no public disclosure form when a plan to schedule share purchases takes place which can ultimately give insiders an advantage on the trading block. The research in academia has confirmed these trades are more beneficial in the ability to avoid losses inside a 60-day window.

FINSUM: These changes could lead to substantially less stock buyback plans in the coming years as insiders could face more symmetric returns.

Published in Wealth Management
Thursday, 14 October 2021 21:36

Is this the End of Reg BI?


The SEC’s Investor Advocate has pointed out that Reg BI is under threat. Some of the developments in the market have meant that Reg BI may be rendered useless. In particular, the increasing use of “nudges” in trading inevitably rubs against the fundamental meaning of Reg BI. If trading platforms for retail investors are constantly using “nudges”, or encouragements to trade, how much does that constitute a recommendation? That is the esoteric question that the SEC must address. According to the SEC’s Investor Advocate, Rick Fleming, “In my view, it appears that the use of certain DEPs, by gamifying securities trading for retail customers, could significantly influence these retail customers’ investment decisions in ways that were not fully contemplated when the commission adopted Reg BI with its important distinction between solicited and unsolicited trading.

FINSUM: Reg BI is only a couple years old and it is already antiquated!

Published in Wealth Management
Wednesday, 13 October 2021 21:27

Reg BI May Get New Addition from SEC


Advisors have been paying very close attention to Reg BI. This is especially true because the Biden administration looks poised to make a number of changes to the rule, including defining “fiduciary” and bolstering enforcement. However, that appears to not be all as the SEC may be set to make an addition to Reg BI: a new section covering the gamification of trading. The SEC’s Investor Advocate, Rick Fleming, says that “N]ow it seems that most if not all of the on-line discount brokers are influencing investor behavior with digital engagement practices, which further blurs the line between providing investment advice and traditional brokerage service … At some point, if the Commission fails to brighten the distinction between advisors and brokers, it will make little sense to regulate the two with such distinct regulatory models.”.

FINSUM: Critical changes to definitions, much heavier enforcement looming, and now a pandora’s box on gamification. And this might be just the beginning.

Published in Wealth Management
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