The Southern District of New York Daniel Patrick Moynihan U.S. Courthouse in Manhattan. (Photo: Rick Kopstein/ALM) The Southern District of New York Daniel Patrick Moynihan U.S. Courthouse in Manhattan. (Photo: Rick Kopstein/ALM)

The lawsuit filed against the Securities and Exchange Commission’s Regulation Best Interest by eight attorneys general has been dismissed by the Southern District of New York.

The court wants the matter to be taken up by the U.S. Court of Appeals for the 2nd Circuit.

New York Attorney General Letitia James noted when filing the original suit on Sept. 10, as leader of the AG coalition, that “Because the SEC claimed authority to issue Regulation Best Interest under such a broad set of statutory authority, it was necessary to file for relief in both the Southern District of New York and U.S. Court of Appeals for the Second Circuit,” which has original jurisdiction over rules promulgated pursuant to the Securities Exchange Act of 1934.

The states are challenging Reg BI for failing to institute a uniform fiduciary standard and “meet basic investor protections” that were laid out in the Dodd-Frank Act.

The AG complaint states that Reg BI “undermines critical consumer protections for retail investors, increases confusion about the standards of conduct that apply when investors receive recommendations and advice from broker-dealers or investment advisers, makes it easier for brokers to market themselves as trusted advisers (while nonetheless permitting them to engage in harmful conflicts of interest that siphon investors’ hard-earned savings), and contradicts Congress’s express direction.”

— Check out XY Planning Network Sues SEC Over Reg BI on ThinkAdvisor.