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January 07, 2020 at 01:00 PM
The Securities and Exchange Commission’s Regulation Best Interest violates Section 913 of the Dodd-Frank Act, which directed the commission to “harmonize” the standards of conduct for broker-dealers and investment advisors through a fiduciary rule, current and former Democratic lawmakers, including the law’s authors, told the U.S. Court of Appeals for the 2nd Circuit.
Congress’ mandate in Section 913 of Dodd-Frank “required that any rule promulgated to address the inconsistent standards of care between investment advisers and broker-dealers must harmonize those standards of care,” the lawmakers, which include former Rep. Barney Frank and former Sen. Chris Dodd, said in their amicus brief supporting XY Planning Network’s lawsuit against Reg BI. “The rule therefore cannot stand.”
Reg BI “fails to harmonize the standards for broker-dealers and investment advisers through a fiduciary rule, and is therefore at odds with the text and structure of Section 913, as well as Congress’ plan in passing it,” the current and former lawmakers state.
House Financial Services Committee Chairwoman Maxine Waters, D-Calif., and Senate Banking Committee ranking member Sherrod Brown, D-Ohio, further state in the amicus brief that Dodd-Frank did not give the agency permission to write a separate rule.
In its final rule, “the SEC suggests that it issued the rule pursuant to a ‘grant of rulemaking authority in Section 913(f),’ on the theory that that Section 913(f) provides an ‘overlapping, yet distinct, rulemaking power’ with Section 913(g).”
To be sure, the amicus brief continues, “Section 913(f) provides the SEC with the authority to ‘commence a rulemaking … to address the legal or regulatory standards of care for brokers, dealers, [and] investment advisers … for providing personalized investment advice about securities to such retail customers.’”
