Members of the U.S. Securities and Exchange Commission voted 3-1 Wednesday to approve the SEC’s Regulation Best Interest: The Broker-Dealer Standard of Conduct (Regulation BI).
The SEC has posted a 771-page regulation packet for Regulation BI, which is set to have a compliance date of June 30, 2020.
The SEC also agreed to update its customer relationship summary (CRS) form to reflect the Reg BI changes, and to issue instructions on how registered investment advisors should interpret their fiduciary duty requirements.
The SEC began working on the Reg BI project after the U.S. Department of Labor began to have problems with implementing its own fiduciary rule regulations. The new standard requires broker-dealers to act in investors’ best interest when making investment recommendations.
Groups representing the securities industry and financial planners have started to weigh in.
The Securities Industry and Financial Markets Associations says the new regulations appear to be tough.
The Financial Planning Association says the Reg BI best-interest standard falls short of what a fiduciary rule would provide.
Here’s what four major life and annuity groups are saying.
American Council of Life Insurers (ACLI)
ACLI President Susan Neely put out a statement praising Reg BI.
“Reg BI strikes the right note — arming people with the information they need to make good purchasing decisions while safeguarding their access to a broad selection of solutions to secure their retirement,” Neely said in the statement. “Protecting consumers does not mean limiting their choice of products and services.”
Neely believes the Reg BI is more sensible and sustainable than the Labor Department’s fiduciary rule, according to the ACLI.
Neely said the ACLI would like to see the SEC continue to work with the National Association of Insurance Commissioners and the Labor Department on a harmonized and uniform standard of care for investment advice.
National Association of Insurance and Financial Advisors (NAIFA)
NAIFA Chief Executive Officer Kevin Mayeux said in a statement that the new best interest standard “addresses perceived shortcomings in consumer protection without placing undue barriers between insurance and financial professionals and their clients.”
Reg BI “preserves the ability of Main Street investors to receive needed products, services, and advice by not favoring one business model over another,” Mayeux said.
AALU President Marc Cadin said his group appreciates the SEC’s effort to ensure that the standard of care for broker-dealers and registered investment advisors is appropriate and protects consumers.
We support a best interest standard that preserves commission-based business models as well as product choice and access to professional financial advice,” Cadin said.
But “”there are a number of key areas where the ultimate impact on consumers is unclear,” continued Cadin.
One AALU concern is the Form CRS update, Cadin said.
“AALU supports clear and simple disclosure of roles, obligations, product offerings, and material conflicts, and we will be examining the extent of the SEC’s focus on layered disclosure in the final rule that guides consumers to additional information,” AALU said.
Insured Retirement Institute (IRI)
IRI said in a statement that it’s carefully reviewing the final Reg BI rule in detail.
Jason Berkowitz, IRI’s chief legal and regulatory officer, said that IRI supports the principle that financial professionals should be required to act in clients’ best interest.
“IRI will review and evaluate this extensive new regulation and will work with the [SEC] to advance toward a new era of enhanced investor protection,” Berkowitz said.
Links to several Reg BI documents, including a copy of the final regulation, are available here.
— Read SEC Passes Regulation Best Interest by 3-1 Vote, on ThinkAdvisor.