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Regulation and Compliance > Federal Regulation > SEC

SEC Advice Standards Package Likely by First Half of 2019: Grim

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The Securities and Exchange Commission will vote on a final standards of conduct package for brokers and advisors likely during the first half of 2019, David Grim, former director of the SEC’s Investment Management Division, said Thursday.

Grim, now a partner at Stradley Ronon in Washington, said on a webcast held by the law firm that while he’s confident a plan will be adopted by the commission, “there’s lots of variables around” getting there.

Changes will likely be made to Regulation Best Interest for brokers and the Customer Relationship Summary disclosure form, or Form CRS.

While a majority of the commissioners will need to support the multi-pronged plan, SEC Chairman Jay Clayton “has been very clear that this continues to be a priority of his,” Grim said.

Commissioner Kara Stein, a Democrat, voted against the plan when it was released for comment in April, so “it’s not likely” she’d support it. But Stein will be leaving the commission by the end of 2018, Grim pointed out.

As to Commissioner Robert Jackson, also a Democrat, Grim stated it will likely “be hard” for him to support a final plan. While Jackson did vote to release the proposal for comment, “what little he has said has not been very supportive.”

Commissioner Hester Peirce, a Republican, meanwhile has “raised a lot of questions about the proposal,” Grim continued, “but she’s indicated a willingness to work with Clayton.”

The newest Commissioner, Elad Roisman, who was confirmed on Sept. 5, has remained relatively quiet about the proposal, though “he does have a lot of experience with these issues because of his time on the Hill” as the former counsel on the Senate Banking Committee, as well as his prior time at the SEC.

His testimony during his confirmation hearing mentioned “things about investor choice, investor access, and the importance of disclosure, that sort of hint toward some level of support.”

Grim stated that changes will likely come to Form CRS, as “there’s been a lot of good comments on how to make that better, both from the industry and from investors.” Clayton, too, has mentioned “getting rid of the jargon” around the form.

The plan’s efforts to restrict titles “may have trouble getting to adoption,” Grim opined, partly because its champion, former SEC Commissioner Michael Piwowar, is no longer at the commission.

Stradley also believes that Reg BI will have a “major” impact on the following areas:

  • IRA rollovers (when part of the recommendation involves a security);
  • noncash compensation in connection with sales contests and promotions; and
  • compensation that incents sale of one product over another such as proprietary or preferred provider funds.

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