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January 24, 2020 at 10:06 AM
Industry officials are warning advisors and broker-dealers not to dawdle on compliance with the Securities and Exchange Commission’s Regulation Best Interest and advice-standards package, with one compliance firm stating that the consequences for noncompliance are “heavy.”
Top of mind for advisors and broker-dealers is whether they “need to race to comply” with Reg BI if the rule is going to suffer the same fact as the now-defunct Labor Department fiduciary rule, according to Blaine Aikin, executive chairman at Fi360, a fiduciary education, training and technology company.
Despite legal challenges, however, advisors and broker-dealers “don’t have much choice” but to comply with Reg BI’s June 30 compliance date, Aikin said during a recent Fi360 webinar.
Aikin, along with Duane Thompson, Fi360’s senior policy analyst, agreed that as with the vacated Labor rule, “you have to assume the deadline will take effect when the agency said it would.”
Further reason to press ahead: The direction of fiduciary advice “is certainly one that’s going to be maintained; we can see that there is increased emphasis towards fiduciary principles,” Aikin added.
Like its Labor fiduciary rule predecessor, Reg BI is undergoing challenges in the courts and “most immediately from state initiatives that purport to offer state residents greater protection than Reg BI,” the Bates Group, a regulatory compliance and litigation consulting firm, writes in a recent paper. “Despite these challenges, the obligations Reg BI imposes on financial firms are real and immediate. They require considerable preparation, and the consequences for failure to comply are heavy.”
Whether the Reg BI “survives in the long run remains an open question; current compliance with it is not,” Bates warns.
Indeed, Thompson stated that the SEC’s exam priorities for 2020 show a heightened focus by the agency on the advice-standards package.
Pete Driscoll, director of the SEC’s Office of Compliance Inspections and Examinations, said that in January, as part of the agency’s regular broker-dealer exams, “We’ll start having a series of questions to talk with firms about: How’s implementation going? What questions do you have?”
