Three top Democrats on the Senate Banking Committee pressed the Financial Industry Regulatory Authority to provide its interpretation of the Securities and Exchange Commission’s standards of conduct package, calling Regulation Best Interest for brokers “confusing and ambiguous.”
“Because FINRA serves as the primary regulator of the brokerage industry, your interpretation of the SEC’s proposal is critical to understanding how the proposal would affect retail investors,” Sens. Elizabeth Warren, D-Mass.; Sherrod Brown, D-Ohio; and Cory Booker, D-N.J., told FINRA CEO Robert Cook in their Friday letter.
The senators prodded Cook to provide FINRA’s views “promptly so that we and other interested parties can account for those views in any comments we submit to the SEC.”
The comment period on the advice package expires on Aug. 7. The senators asked that Cook provide answers to six questions before Aug. 3.
“Despite its title implying a much more stringent standard, this [Reg BI] proposal is unlikely, for several reasons, to give investors the peace of mind they deserve that the advice they are receiving is truly in their best interests,” the senators wrote.
The senators pointed out that the SEC commissioners have developed “remarkably different interpretations of what exactly the rule would require with regards to brokers’ potential conflicts of interest.”
The proposal “does not explicitly prohibit the most egregious sales practices that clearly incentivize brokers to put their own interests ahead of their clients, such as sales quotas and contests,” the senators write.