Looking back on a year of great progress for our industry

When we look at back at the biggest changes in our industry’s regulatory and legislative landscape in 2019, the headline items will no doubt be the SEC’s Regulation Best Interest and passage of the SECURE Act.

We are pleased to have worked with the SEC to help shape Reg BI, which increases transparency and protection for investors while maintaining advisers’ ability to effectively serve their clients.

More recently, the passage of the SECURE Act is a testament to the power of grassroots engagement. This crucial victory for Main Street Americans was achieved after a year-long engagement with lawmakers, during which our members met with their legislators to underscore the importance of this measure for their clients.

With these victories capturing so much attention, it would be easy to think of other regulatory and legislative developments in 2019 as footnotes. We are continually mindful, however, that laws and rules passed by state lawmakers and regulators have just as profound an impact on our industry as the measures that grab the biggest headlines.

With that in mind, we are pleased to report meaningful progress on the following issues in 2019:

Independent contractor status. Educating policymakers on the centrality of the independent contractor model to our industry is constantly ongoing, as new legislators are elected and court rulings create shifts in various independent contractor standards.

Our effectiveness in this mission of education was on display this year in the battle over California’s Assembly Bill 5, which will reclassify hundreds of former contractors in the state as full-time employees in 2020. Thanks to our productive dialogue with legislators and our members’ engagement, we secured a carve-out in the legislation for independent financial advisers.

State fiduciary rules. Several states advanced rules this year that demonstrated the damage that could occur if advisers are subjected to an inconsistent and confusing patchwork of different standard-of-care obligations across the country. Such an outcome would severely restrict investors’ access to financial advice and cause excessive complications and uncertainty for advisers.

Massachusetts’ Securities Division has proposed a rule requiring advisers to make only the “best available” recommendations to clients based on currently available information – without providing clear definitions and standards for such recommendations, nor identifying which body will make these determinations.

New Jersey is moving ahead with a rule that would create a fiduciary obligation for advisers who provide even a single recommendation to an investor, even for nothing more than a one-time transaction.

We remain dedicated to combating these proposals, and we were pleased to help defeat a similar rule this year in Maryland.

Pushing back against regulation by enforcement. The SEC’s Share Class Selection Disclosure initiative represented the most harmful example of a trend that has been building for years – the tendency of the SEC and other regulators to substitute ad hoc enforcement actions for transparent and consistent rule-making procedures.

This practice makes effective planning and compliance vastly more difficult for advisers and firms across the country. We are leading the charge to end regulation by enforcement through ongoing constructive dialogue with regulators and by educating members of Congress on the threat it represents to our members’ businesses.

[More:​ Working to get Reg BI implemented]

Dale Brown is president and CEO of the Financial Services Institute.