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Rollovers, Revenue Sharing Could Be in Examiners' Sights: SEC's Peirce

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What You Need to Know

  • Peirce reiterated her hope Reg BI has “a chance to let it play out before we start to make changes to it.”
  • Consistency among Reg BI standards is important for investors, she said.
  • Form CRS is “too dense,” Peirce said, wondering whether “in practice” it will be helpful for investors.

SEC Commissioner Hester Peirce said Wednesday that “it will matter how we implement [Reg BI] in terms of enforcement and examinations,” and reiterated her hope that the industry has “a chance to let it play out before we start to make changes to it.”

In a virtual event held Wednesday by the Insured Retirement Institute, Peirce reiterated her concerns that the Customer Relationship Summary, or Form CRS, is “too dense,” and wonders whether “in practice” it will be helpful for investors.

What should firms expect from their next exam in terms of Reg BI compliance?

Peirce said that it will depend on “fact and circumstances,” but noted that firms should look at, for instance, how they treat rollovers and how they disclose revenue sharing agreements.

“It’s important for compliance programs to be in place so to make sure that not only are the procedures there but that people are actually, in their day-to-day interactions with investors, that they’re following through on those things,” Peirce said.

Disclosure “is very important,” Peirce continued. “We’ve already seen that’s a focus at the agency, in enforcement actions we’ve seen that, and … I’m not a fan in providing regulatory clarity through enforcement actions, but I think people should draw from that.”

When asked how the agency will handle coordination with competing advice standards put forth by the Labor Department, National Association of Insurance Commissioners and the states, and whether she sees potential harmonization around those standards, Peirce said: “I think it is important to have consistency; it’s important for investors that there be consistency. … One could think about federal preemption as a possibility to have uniformity.”

But, Peirce added, “I think realistically this [best-interest] standard is going to play out in enforcement and examinations, and so I suspect that there will be close coordination with FINRA, with state regulators on those fronts as well. We have a very complicated financial regulatory structure in the United States and so there’s an advantage to that, but this is also an area where there can be challenges because if we’re not all tracking it can be quite difficult.”