NASAA distances itself from state fiduciary efforts, wants Reg BI to succeed

Cracked concrete wall with rule word on and blue sky outside

IRI also pushes for SEC rule, and a bill to promote annuities in retirement plans.

State regulators are putting some distance between themselves and state lawmakers pushing for state-level investment advice reform regulations.

Legislative and regulatory efforts are underway in Nevada, New Jersey and Maryland to raise the broker standard of care.

Michael Pieciak, Vermont commissioner of financial regulation, said the organization he leads, the North American Securities Administrators Association, will concentrate on helping make the Securities and Exchange Commission’s advice proposal better.

“A lot of stakeholders at the local level want to protect investors, want to protect citizens in their states, and that’s their prerogative,” Mr. Pieciak said on Capitol Hill on Tuesday. “We have been as an association focused on engaging with the SEC, trying to provide as many comments, as much direction as to how we think it can be improved as possible because we think that’s the most valuable use of our time right now.”

Mr. Pieciak said a recent NASAA comment letter on the centerpiece of the SEC proposal, the so-called Regulation Best Interest, was not meant to be critical of the SEC’s effort.

State regulators instead were encouraging the agency to state explicitly how the measure would force the brokerage industry to change practices that allow harmful, conflicted advice.

“We want to see the SEC succeed; we want to see the rule succeed,” Mr. Pieciak said in an interview after the event. “We think they should clarify their guidance and provide examples of how the rule will play out in specific factual scenarios.”

He appeared at an event at which NASAA released its legislative agenda for this Congress. In addition to calling for strong congressional oversight of the SEC’s rulemaking process on Regulation Best Interest, state regulators also are advocating to protect state securities enforcement authority from federal intrusion, beef up oversight of the sale of unregistered securities as well as regulation of the pool of sophisticated investors who can buy them, and curb mandatory arbitration in brokerage and advisory contracts.

Earlier Tuesday, the Insured Retirement Institute also unveiled its legislative and regulatory agenda, which includes support for Regulation Best Interest as well as an effort by the National Association of Insurance Commissioners to strengthen annuity sales rules.

“We think the approach the SEC has taken, as well as NAIC, are appropriately product-agnostic and [ensure] financial professionals are acting in their client’s best interest,” said Jason Berkowitz, IRI chief regulatory and legislative affairs officer.

Investor advocates have asserted the SEC and NAIC proposals fall far short of required reforms to protect investors.

The IRI also is urging Congress to pass the Retirement Enhancement and Savings Act, which was recently introduced in the House. Among other provisions, the bill would make it easier for employers to include annuities in company retirement plans and would make annuities portable between jobs.

“We’re going to see momentum building to move legislation sometime this year,” said Paul Richman, IRI chief government and political affairs officer.

A spokesman for Senate Finance Committee chairman Charles Grassley, R-Ia., said RESA is a priority for Mr. Grassley and that he will “re-introduce legislation as soon as it’s ready.”