Section 913 of the Dodd-Frank Act granted the Securities and Exchange Commission “broad authority” to craft a standard of conduct rule for broker-dealers, and the agency, in drafting Regulation Best Interest, used its expertise “to craft a rule that balances many competing considerations,” Republican lawmakers told the U.S. Court of Appeals for the Second Circuit.
In their 37-page amicus brief filed on Tuesday in the case brought against Reg BI by XY Planning Network and seven state attorneys general, the lawmakers — which included Reps. Ann Wagner, R-Mo.; Andy Barr, R-Ky.; French Hill, R- Ark.; Blaine Luetkemeyer, R-Mo; and Sen. Tom Cotton, R-Ark. — argued that Section 913 of Dodd-Frank “does not restrict the SEC’s authority to a binary choice between imposing either a single duty on all investment professionals or doing nothing at all.”
Indeed, the lawmakers wrote, the much-debated subsection 913(f) of Dodd-Frank “speaks of ‘standards,’ not ‘one standard.’”
The XY Planning and state AGs’ case presents this question: “Does section 913 of the Dodd-Frank Act contain a circuit breaker or a dimmer switch?” the lawmakers state.
“The answer is straightforward. As with almost all delegations of lawmaking power to regulatory agencies, in section 913 Congress granted the SEC broad authority to use its expertise to craft a rule that balances many competing considerations,” the lawmakers said.
The lawmakers then cite a subsection titled “Rulemaking,” in which Congress stated: “The Commission may commence a rulemaking, as necessary or appropriate in the public interest and for the protection of retail customers (and such other customers as the Commission may by rule provide), to address the legal or regulatory standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice about securities to such retail customers.”
“This is classic discretion-granting language,” the lawmakers argued.