A Joe Biden presidential win won’t necessarily result in the Securities and Exchange Commission’s Regulation Best Interest being overturned, according to XY Planning Network co-founder Michael Kitces.
However, a new administration and new SEC head may very well reinterpret the solely incidental exemption of the Investment Advisers Act of 1940, making Reg BI “largely a moot point,” he said Monday afternoon, during a media roundtable, in response to a ThinkAdvisor question.
Earlier in the day, XYPN said it would not appeal to the Supreme Court an appeals court ruling upholding Reg BI. The group instead retained industry lobbyist and fiduciary advocate Duane Thompson, president and founder of Potomac Strategies LLC, to help XYPN advocate for fiduciary standards at the state level, it said.
Morningstar analysts recently predicted a Biden administration would seek to overturn Reg BI.
“As we’ve seen for the past eight-plus years, whoever is in the administration does seem to have a rather material impact on the shape and the contours certainly of federal legislation,” Kitces said during the roundtable. “And it’s not hard to imagine a swing back towards the fiduciary direction should Biden win.”
However, he was quick to add: “There is still a fundamental challenge,” which is “that neither the regulators nor the industry, even from our side, like to see major regulations change every couple of years. It’s just disruptive to everyone. And so, even under a Biden administration, I don’t know if there will necessarily be an appetite to repeal Reg BI and replace it with yet another new framework.”
That would likely lead to “another couple of years fighting around” the new rules, he said.
“But we do see there’s a lot of room at the margin for a new administration and new SEC commissioner to approach this differently,” he pointed out.
Because the SEC used “interpretive guidance” and did not create a new rule, the judge in XYPN’s dispute with the SEC over Reg BI ruled the SEC had the right to interpret its rules the way it wanted, Kitces pointed out.
That means, however, it is still “on the table to propose and urge a future SEC administration to reinterpret that rule again into something more consistent with what Congress originally intended,” he said.
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