Editor’s note: This article first appeared in Human Capital, a newsletter by Washington Bureau Chief Melanie Waddell about the people who shape the financial regulatory space.
Welcome back to Human Capital! This week Phyllis Borzi, architect of the now-defunct Labor Department fiduciary rule, is sitting on pins and needles awaiting the outcome of the Securities and Exchange Commission’s advice-standards package — particularly Regulation Best Interest.
Her take on Reg BI: If it’s passed without “major” changes, the “industry continues its conflicted practices,” she tells Human Capital.
What should Labor’s response be after SEC finalizes its plan? Nothing, she said.
How does she feel about the states moving forward on their own advice-standards plans? It’s worrisome, she says.
Borzi, former assistant secretary for Labor’s Employee Benefits Security Administration under former President Barack Obama, toiled for six years along with former Labor Secretary Tom Perez to bring the Labor fiduciary rule to the finish line, only to see it vacated by the U.S. Court of Appeals for the 5th Circuit last June.
Her thoughts on the SEC stepping up to the fiduciary helm? “I had mixed feelings about it, but I did what I could to encourage [SEC Chairman Jay Clayton] to do [the package] and put a positive spin on it because I was hopeful that doing something would move the ball down the court.”
Has it? “A federal standard has to protect investors, and what’s currently being considered [in Reg BI] I don’t think is going to move the ball forward. In fact, I think it might lull some consumers into thinking that the problem has been solved because under Reg BI, people can represent that they’re acting in somebody’s best interest without being legally obligated to do so.”