FINSUM + Magnifi: Brokers Need to Watch for Heavy New SEC Enforcement
(March 2021)
Brokers, those that are dually-registered, pretty much anyone covered by Reg BI, you should be on the lookout for a pending crackdown by the new Biden administration-led SEC. Industry insiders and former regulators are warning that enforcement of the new Reg BI rule is likely to be strict. Former chief of FINRA, Susan Schroeder, says that enforcement is likely to start soon (i.e. this year) and may be “very aggressive”. According to Schroeder, “Early enforcement actions will be predicated on things like policies and procedures, but by past SEC standards, that is very aggressive”, and if the enforcement actions “are predicated on things like inadequate training or failures to have policies and procedures, from a legal theory perspective, that’s aggressive”.
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FINSUM + Magnifi: Why the Election Means the New DOL Rule Is Dead
(October 2020)
For much of the year, the wealth management industry has been concerned about the fiduciary rule. While it is not as onerous as the first version of the rule, it is universally disliked—those who are against a fiduciary concept for brokers dislike it, but so do those who want a uniform fiduciary rule. Well, everybody is likely to be happy then as it is appearing increasingly uncertain whether the new DOL rule will ever come into force. The reason why is simple—the DOL has probably run out of time. According to partner Bradford Campbell at industry-leading law firm Faegre Drinker Biddle & Reath, there just isn’t enough time to do the full rewrite of the rule that the DOL needs to accomplish before the effective November 1st deadline. November 1st is essentially the safe date for the rule, as it needs to be on the books before then to have a good chance of becoming permanent. Speaking about the possibility of Biden becoming president and overturning the rule, “Basically speaking, if a rule has been on the books for more than 60 days, to displace it, you have to do new notice and comment rulemaking," says Campbell.
FINSUM + Magnifi: Why Reg BI Will Get Scrapped Within a Year
(September 2020)
Make no mistake about it. If you were to make odds on whether Reg BI will still be in place one year from today, most would put the chance at less than 50%. That is a pretty dramatic reality for the SEC’s centerpiece legislation of the last half decade. The reason why is that the Democratic party and Joe Biden have made it very clear that they want to pursue a more robust fiduciary standard, and they are currently ahead in the polls. If Biden wins the election, they have many avenues to do this, such as by replacing the head of the SEC, or by passing legislation that alters the Dodd-Frank Act to require a true fiduciary component.
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FINSUM + Magnifi: Morningstar Says Plans are in Motion for Overturn of Reg BI
(September 2020)
2020 has seen both the implementation of the SEC’s new Reg BI rule as well as the introduction of a new DOL Fiduciary Rule proposal. While both have faced opposition on all sides, it was uniformly less intense than the scorn the first fiduciary rule received. That said, Morningstar is reporting that plans are underway to scrap the new Reg BI rule, which only became official in June. More specifically, Biden is planning to scrap both rules if he takes office. That is obviously still a very big if, but the process is quite clear. Biden would appoint a new head of the SEC, who would then scrap the rule. Or, the Dodd-Frank act could be amended to make clear a full fiduciary rule needs to be in place.
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FINSUM + Magnifi: Watch Out for the New DOL Rule’s Nasty Surprise
(September 2020)
Generally speaking the wealth management industry has been fairly placid about the new fiduciary rule. The current version of the DOL rule is significantly watered down from the then-apocalyptic first version. It is mostly consumer protection groups who are fighting it. However, within the rule is a nasty surprise—for the insurance industry. Independent insurance agents are likely to be very harmed by the rule because they will become de facto fiduciaries, making their role significantly more complicated. Insurance IMOs (independent marketing organizations) will also become very complicated from a regulatory perspective. Ironically, this will likely benefit the wealth management space generally.
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FINSUM + Magnifi: Why the New Fiduciary Rule is a False Victory for Brokers
(September 2020)
There has been a lot of consternation about the new DOL fiduciary rule. Some of it from brokers, more of it from fiduciaries and investor protection groups. What has been much less covered, however, is the insidious rise of state level fiduciary rules that are threatening to create a national patchwork of regulations that could isolate the industry into little islands. Therefore, the introduction last week of a new fiduciary rule for Massachusetts is a big deal. It comes on the heels of nearly a dozen other state fiduciary rule proposals and highlights that many states are unsatisfied with the new federal rule and still want to take matters into their own hands.
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