Nearly 10 years in the making, the effort to heighten the advice standard for brokers was solidified on June 5 when the Securities and Exchange Commission passed Regulation Best Interest.
Phyllis Borzi, former head of the Labor Department’s Employee Benefits Security Administration, launched Labor’s bid to require that broker-dealers adhere to a fiduciary standard when advising retirement accounts in 2010. Former Labor Secretary Tom Perez took up the fiduciary mantle and helped Borzi push Labor’s rule to the finish line in April 2016, only to see it vacated by a U.S. appeals court in June 2018.
Current Labor Secretary Alexander Acosta confirmed to lawmakers in May that Labor would indeed issue new fiduciary-related rules this year. Industry officials anticipate those rules by fall.
While the broker-dealer industry, as well as SEC Chairman Jay Clayton, have heralded Reg BI as raising the advice standard for brokers beyond current suitability standards — and that the broker rule “draws from key fiduciary principles” — proponents argue it falls far short of the uniform fiduciary standard that Congress directed the agency to promulgate under Section 913 of the Dodd-Frank Act.
At press time in mid-June, states pressed ahead on their own fiduciary rules, with William Galvin, Massachusetts’ top securities regulator, issuing a fiduciary proposal on June 14 in reaction to Reg BI.