Financial advisors and wealth management firms concerned that the Biden Administration will trash the SEC’s Regulation Best Interest immediately can rest a bit more easily.
At a panel held Oct. 19 by the New York University School of Law’s Program on Corporate Compliance and Enforcement, SEC Chair Gary Gensler promised vigorous enforcement of the existing rule that went into effect under the Trump Administration last year rather than sharing any plans for an overhaul.
The comments may disappoint fiduciary-standard advocates who have expressed hope that Gensler’s team will
“We have significant tools and examinations across the agency to try to ensure that regulation best interest means just that — when a broker makes a recommendation, it's in your best interest, the investing public,” Gensler said, largely
In talking about enforcement of the rule as it stands rather than moving forward with reforms to it, Gensler kept any possible longer term goals out of the discussion. Wealth managers took notice in August when
In other words, the fiduciary advocates may yet have reason to celebrate stronger action on Reg BI next year or the following year, according to Michael Canning, the former director of policy and government affairs for the North American Securities Administrators Association and founder of regulatory consulting firm The LXR Group. Gensler and Roper haven’t been in their positions long, and the SEC chair is working on other issues such as ESG disclosures, payment for order flow and shareholder rights.
“Making revisions to Reg BI is going to require, at minimum, political will and political capital, and solid data that is sufficient to make the case to stakeholders and to support a credible economic analysis (i.e. that credibly disputes premises used in the economic analysis that justified BI),” Canning said in an email. “I don’t think either of those things exist yet. So, despite the quiet, I think this is very much an issue that remains unsettled. Right now we’re in a position of waiting until more data comes in and more bandwidth frees up.”
Most of Gensler’s statements at the virtual panel with more than 500 attendees revolved around the
By requiring standard data disclosures for companies with securities it regulates, the SEC can “play a positive role” in protecting consumers on the one hand and supporting capital formation on the other through heightened transparency, Gensler said.
“Investors get to decide; they get more consistent, comparable decisions, useful information,” he said. “Standardization also gives the companies a sense of, ‘This is what I need to do,’ but not only that, ‘This is what my competitors are saying in the same space.’ And I'm competing for capital in a more fair and orderly, efficient way.”
