Clayton hints Reg BI may be out earlier than expected

SEC chair didn't offer details but said: "You won't have to wait long"

May 2, 2019 @ 2:08 pm

By Mark Schoeff Jr.

Securities and Exchange Commission Chairman Jay Clayton remained tight-lipped about investment advice reform regulation on Thursday, but he hinted that it might be released sooner than expected.

In a discussion with reporters, he sidestepped a question about how the centerpiece of the package, so-called Regulation Best Interest, would address mitigation of broker conflicts of interest.

"Wait and see," Mr. Clayton said on the sidelines of an Investment Company Institute annual meeting in Washington. "You won't have to wait long."

Mr. Clayton seemed to suggest that a final rule was imminent. Most observers are predicting a release sometime this summer. Mr. Clayton didn't elaborate on a timeline.

(More: Valerie Brown discusses the SEC advice rule and why it should preempt state efforts)

How quickly a final rule emerges depends on how many votes from the current four-member commission Mr. Clayton wants to secure. The fifth SEC seat is currently open.

In a speech last month, SEC member Robert Jackson, Jr.. urged Mr. Clayton to build bipartisan support for a final rule. Mr. Jackson, who was chosen by Democratic lawmakers, has expressed concerns about Regulation Best Interest.

Republican commission members Hester Peirce and Elad Roisman are expected to vote in favor of a final rule. Combined with Mr. Clayton's support, that would give the commission the three-member majority needed for approval.

The Trump administration has nominated Allison H. Lee for the open Democratic SEC seat. It may take several weeks for her to obtain Senate confirmation. It's not clear whether Mr. Clayton will wait for her to come on board before holding a vote.

As the SEC nears completion of its work on investment advice reform, Labor Secretary Alexander Acosta told lawmakers on Wednesday that the agency would revisit advice rules for retirement accounts. He suggested new regulations to replace the defunct DOL fiduciary rule would be based on the pending SEC package.

Most of the financial industry opposed the DOL rule, asserting that it would increase regulatory burdens and legal risk for brokers. ICI chief executive Paul Schott Stevens criticized the DOL rule in a Q&A with Mr. Clayton at the conference.

Mr. Clayton stressed the SEC advice rule would preserve the brokerage model. He said investors benefit when they have a choice between brokers and investment advisers, who would continue to meet a fiduciary standard under SEC regulation.

(More:Best the SEC can do or huge step backward? Industry leaders tussle over advice reform)

"Competition among the people in this audience has in many ways inured to the benefit of investors over time," Mr. Clayton told the ICI conference. "People are paying less for better service, and I want to continue that trend."

An investor advocate said Regulation Best Interest lacks the teeth to change broker conflicts that harm investors.

"Since Reg BI does not require brokers to do anything different to mitigate conflicts, there's no threat to the broker model," said Knut Rostad, president of the Institute for the Fiduciary Standard.


What do you think?

View comments

Most watched


Finding your edge from Tony Robbins

Guru Tony Robbins has helped a lot of people, but armed with his psychology Financial Advisor Josh Nelson has helped his practice soar.


Finding innovation in your firm

Adam Holt of AssetMap explains how advisers understand they need to grow, but great innovation may be lurking right under your nose.

Latest news & opinion

Redtail CRM data breach exposes personal client data

The information exposed includes names, addresses, dates of birth and Social Security numbers.

This strategy can double your estate-tax exemption

'Portability' allows a surviving spouse to tack the decedent's exemption on to his or her own. Despite the higher threshold for paying estate taxes in the 2017 tax law, experts recommend filing for the benefit.

Couple in Morgan Stanley advisory account wins $519,000 arb case over unsuitable investments

Plaintiff's lawyer says junk bonds, futures contracts and derivatives were inappropriate for his clients.

The growth of factor-based investing

Advisers are making decisions about clients' portfolios by using the same characteristics that govern factor-based ETFs.

Finra makes its list to target hundreds of rogue individuals

The regulator sees patterns in the behavior and disclosures of high-risk brokers.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print