After a deluge of SEC cases this year involving some of its largest member firms, independent broker-dealer advocacy group FSI is publicly crying foul.
Recent cases and settlements relating to disclosure of 12b-1 fees and other mutual fund costs are examples of “moving the goalposts” and “regulating without rules,” according to FSI. The trade organization
FSI has always opposed what members most commonly refer to as “regulation or rulemaking by enforcement,” but the blasting of the SEC share class disclosure initiative follows months of scant public comments about it by the influential group. Nearly 80 firms agreed to pay
The organization now says the SEC took a “circular approach” to enforcement “to completely bypass the rulemaking requirements.” In earlier closed-door meetings with the regulator, FSI made its view on the mutual fund disclosure cases clear, General Counsel David Bellaire says.
“We have worked hard for years to develop a productive and constructive working relationship with the SEC,” Bellaire said in a statement. “But there is no rational justification for moving the goalposts on firms that diligently complied with the rules on the books.”
He added that the SEC should “consider the damage being done to the industry and hard-working American investors.”
Representatives for the SEC declined to comment. In a statement when the SEC
“Regardless of the scope and duration of the investment advisory services, investment advisors are fiduciaries and, as such, their duties of care and loyalty require them to disclose their conflicts of interest, including financial incentives,” Clayton said. “This initiative will have immediate and lasting benefits for Main Street investors, including through improved disclosure.”
In something of a foil to the regulator’s
The trade group’s argument revolves around the SEC performing “numerous” examinations in the past without raising concerns about their 12b-1 disclosures and its view that the regulator “never set forth guidance or adopted regulations” alerting them to its expectations.
Furthermore, the settlements of varying amounts earlier this year after the SEC announced the program in February 2018 didn’t identify any specific rules or regulations that had been violated. Instead, the regulator cited previous settlements and guidance published in the past, FSI says.
In the two pending enforcement actions since the settlements — which are SEC civil lawsuits
Last week, the SEC
In contrast, Commonwealth Financial Network
Commonwealth Managing Principal John Rooney is FSI’s vice chair and Cetera President Adam Antoniades also serves on the board. Key executives from Pershing and Fidelity Clearing & Custody Solutions — which clear mutual fund transactions and custody assets for IBDs — are on the FSI board as well.
Some 150 advisors and IBD executives will be visiting Capitol Hill next week, in part to make their case directly to lawmakers. FSI seeks a new SEC rulemaking process around mutual fund disclosures that would be implemented on a go-forward basis instead of retroactively.
“Think of your financial advisors as players on the field; they can’t do their jobs if the rules are unclear,”