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Regulation and Compliance > Federal Regulation > SEC

Will Trump Memo Slow Down SEC's Reg BI?

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SEC headquarters in Washington. (Photo: National Law Journal) (Photo: National Law Journal)

Industry officials are debating whether a new memo sent by the Trump administration’s Office of Management and Budget to independent agencies setting out how to comply with the Congressional Review Act when issuing rules will impact the timing of the SEC’s upcoming advice standards package.

Bob Plaze, former co-director of the SEC’s Division of Investment Management, who’s now a partner at Proskauer Rose in Washington, told ThinkAdvisor on Tuesday that the timing of the OMB’s April 11 memo and the upcoming release of the SEC’s advice standards package, including the controversial Regulation Best Interest, may just be coincidental.

The OMB memo seems to be “part of an effort to impose greater political control on independent agencies, which happens from time to time,” Plaze said.

The OMB’s role is to determine whether a rule is “major” or not, with major ones being those deemed to have an annual effect on the economy of $100 million or more.

“There’s no doubt that the advice standards package will be a major rule,” Plaze said.

Barbara Roper, director of investor protection for the Consumer Federation of America, told ThinkAdvisor that “if OMB wanted to slow it [the advice-standards package] down, it would appear this [memo] would give it the means to do so. But I don’t see any reason that they [OMB] want to slow this [SEC rule] down.”

If the SEC package were something that “the [brokerage] industry strongly resisted, or was being adopted under significant headwinds, I would look at this [OMB memo] as more likely to have an impact, but under the circumstances, the brokers can’t rush this [Reg BI rule] through fast enough.”

Phyllis Borzi, former assistant secretary for Labor’s Employee Benefits Security Administration, told ThinkAdvisor Tuesday that she’s “not so sure that it [the memo] is” going to mean a delay for Reg BI.

“If this had been the Obama administration and the Obama OMB, it [Reg BI] would have required more scrutiny. The Trump OMB has let through all sorts of things, … the ERISA stuff, all sorts of regulation that in the Obama OMB would have never been able to get away with. So I’m not so sure, as a practical matter, how much this [memo] might delay a finalized Reg BI,” Borzi said.

“I would think that the problem is not so much ‘does this add another level of review’ they [the SEC] didn’t have to go through before, which is the basis of concern about a delay,” Borzi added. “It’s just not obvious to me that this is just such a substantial additional burden on the SEC that it will, as a practical matter, delay it.”

The memo states that the Congressional Review Act, or CRA, “provides that agencies must submit ‘rule[s],’ defined expansively, to Congress. Congress may then pass a joint resolution of disapproval that, if signed by the President or enacted over the President’s veto, invalidates the rule. If a rule is disapproved, an agency may not issue another rule in substantially the same form unless the new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.”

The CRA, the memo continues, “requires federal agencies to notify Congress of rules they have promulgated and to provide information regarding compliance with the CRA and other statutes. To help prioritize congressional review of rules with important economic impacts, the CRA requires that OIRA [Office of Information and Regulatory Affairs] designate whether a rule is ‘major,’ which signals a rule’s relative importance and economic impacts. The major designation triggers a report by GAO [Government Accountability Office] and a delayed effective date while Congress may consider whether it will disapprove the rule.”


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