SEC Is Mulling Reg BI Rewrite: Lawmaker

The SEC, the lawmaker said, “should reject these calls and instead focus on ensuring robust oversight of the principles set forth in Reg BI as written, and avoid attempts to rewrite or ‘freshen’ the rule through guidance, ‘FAQs,’ or other methods that likely violate the Administrative Procedure Act (APA).”

Micah Hauptman, director of investor protection of the Consumer Federation of America, told ThinkAdvisor Tuesday: “I doubt highly [that the SEC is] planning on rewriting the rule. It’s pretty clear their approach is putting out guidance on various aspects of the rule. I would like to see more enforcement of the rule to give it real teeth.”

Reg BI was finalized in June 2019 after a years-long examination of broker-dealer standards of conduct by Congress and the SEC. Reg BI increased investor protections and established a national standard of conduct for BDs when they make investment recommendations to their customers.

Chris Iacovella, CEO of the American Securities Association, a trade group for regional financial services firms, said Tuesday in a statement that it commends Donalds “for his outspoken leadership on this critical issue.”

Congress, Iacovella said, “is right to have concerns that this SEC seems to be on a crusade to weaken the investor protections in Reg BI. Rewriting Reg BI would frivolously waste taxpayer money, setback every American seeking financial independence, and end investors’ personal choice over how to invest their money. ASA opposes any changes to a rule that works.”

Donalds asked Gensler to answer questions about Reg BI in the next 14 days, including: the total staff hours and costs incurred by the SEC in connection with proposing, finalizing, and overseeing implementation of Reg BI since 2017; An estimate of the cumulative cost already borne by the broker-dealer industry to comply with Reg BI, annual cost for ongoing compliance and analysis of those costs against the SEC’s own cost estimates set forth in the final rule.