Just one year since the Department of Labor fiduciary rule was vacated, the financial services industry is again reeling or rejoicing after the Securities and Exchange Commission’s approval of Regulation Best Interest and its subsequent rulings.
Here’s just some of what the industry has had to say:
Insured Retirement Institute
IRI made several observations about the Commission’s newly minted regulation. The institute expects that the rule will create new requirements for broker-dealers beyond current suitability standards, forcing B-Ds to act in their client’s best interest. IRI believes that Reg BI is a substantial advancement in investor protection especially when it comes to disclosing, mitigating and eliminating conflicts of interest.
IRI says it will work with the National Association of Insurance Commissioners, FINRA and the SEC to reduce the burden of implementing these new regulatory actions on companies.
“IRI has long supported the principle that financial professionals should be required to act in their clients’ best interest,” said Jason Berkowitz, IRI Chief Legal and Regulatory Officer. “IRI will review and evaluate this extensive new regulation and will work with the Commission to advance toward a new era of enhanced investor protection.”
National Association of Insurance and Financial Advisors
In a statement from CEO Kevin Mayeux, NAIFA expressed its continuing support for Reg BI.
“The new best interest standard addresses perceived shortcomings in consumer protection without placing undue barriers between insurance and financial professionals and their clients,” said Mayeux. “The higher standard of care preserves the ability of Main Street investors to receive needed products, services, and advice by not favoring one business model over another. It allows them to choose financial professionals who best fulfill their needs and to compensate those professionals in a way that works best for them, whether through commissions or fees.”
NAIFA got their wish. Although the proposed rule would have restricted broker-dealers from using the term adviser/advisor, the SEC said it was not necessary and therefore not included in a final rule.
The final rule reads:
“After further consideration of our policy goals and the comments we received, and in light of the disclosure requirements under Regulation Best Interest, we do not believe that adopting a separate rule restricting these terms is necessary, because we presume that the use of the term ‘adviser’ and ‘advisor’ in a name or title by a broker-dealer that is not also registered as an investment adviser or an associated person that is not also a supervised person of an investment adviser, to be a violation of the capacity disclosure requirement under the Disclosure Obligation as discussed further below.”
Certified Financial Planner Board
The CFP Board’s reaction to Reg BI’s passage might best be described as “agnostic.” The 771-page ruling has yet to be dissected by the board and its members. So, for now, it’s unclear what, if any, impact it will have on the code and standards maintained by the organization, but CFP Board CEO Kevin Keller is optimistic.
“Professional standards-setting organizations, such as CFP Board, exist in part to set standards that go beyond those required by the law for the benefit of the public and the profession. The new Code and Standards complement, rather than conflict, with the law,” Keller said.
Twitter wasn’t so kind in its dissemination of the bill.
Barbara Roper, director of investor protection at the Consumer Federation of America had this to say about the vote:
The criticism did not stop there. Congresswoman and Chairwoman of the House Financial Services Committee Maxine Waters (D - Calif.) said the rule fails to provide a uniform fiduciary standard and protect retail investors.
“The SEC’s final rule ignores the explicit will of Congress and fails to require all financial professionals to abide by a strong, uniform fiduciary standard of care when providing investors with investment advice,” she said. “Hardworking Americans have lost out on millions of dollars that could have been used to save for their children’s education, purchase a home, or save for retirement due to unscrupulous financial advisers who have put their interests and profit motives ahead of their retail clients. Today’s announced rule will only protect this conflicted behavior to the detriment of mom and pop investors.”
AdvisorNews Managing Editor Cassie Miller may be reached at [email protected] Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.