As the Biden administration ramps up, its actions on headline issues like the pandemic response, climate change and cabinet nominations are drawing the bulk of the nation’s attention. For independent firms and advisers, however, the new administration’s approach to regulation will be among the most consequential outcomes of the November elections.
At the Financial Services Institute, we are eager to work with the new nominees and other officials whose actions and policies will impact our members, including Gary Gensler and Marty Walsh, President Biden’s nominees for SEC chairman and Secretary of Labor, respectively.
It will be critically important in the coming weeks and months that these policymakers engage with the independent financial services industry as they begin to solidify their regulatory priorities.
With that in mind, my team and I will be laser-focused on building and strengthening productive, solutions-oriented working relationships with these new regulators in order to educate them on our 2021 advocacy priorities, including:
• Standard of care issues: We have strongly supported the SEC’s Regulation Best Interest (Reg BI), which has successfully established a common standard of care for advisers across our industry. We are encouraged by initial indications that Mr. Gensler will likely keep Reg BI in place if he is confirmed; however, it will be a high priority for us in 2021 to ensure that the SEC and other regulators understand that Reg BI has been very effective in accomplishing its goals of increasing transparency and clarifying advisers’ obligations of care as currently implemented.
We will be keenly focused on guarding against any efforts to modify Reg BI in ways that would make this landmark rule overly burdensome or unworkable.
We will also work to ensure that the efforts at the Department of Labor and in the states do not lead to the creation of a conflicting patchwork of standard of care rules.
• Improving financial literacy and diversity: Strengthening financial literacy — from grade school to adulthood — is one of our longstanding areas of focus. In 2021, we will continue to proactively support financial education efforts such as in-district financial literacy events with members of Congress and others. We will also continue to support diversity, equity & inclusion efforts intended to expand the industry, making it more inclusive for clients and advisers of all backgrounds.
• Preventing financial exploitation of vulnerable adults: We will continue to support the adoption of the North American Securities Administrators Association's model law protecting seniors from financial abuse, and will support the Financial Industry Regulatory Authority Inc.’s efforts to provide additional tools and flexibility to help firms combat suspected financial abuse, such as longer hold periods.
• Retirement and tax issues: With budget issues intensifying in various states, we will vigorously oppose efforts to create or expand taxes that would burden our members, including taxes on financial services and transactions or professional privilege taxes.
We will also continue our efforts to protect advisers’ independent contractor status, and will advocate for the passage of SECURE 2.0.
• Reducing burdens on advisers and firms: We will continue to seek relief from the SEC to allow the payment of securities transaction income directly from broker-dealers or investment advisers to business entities operated by financial advisers.
• Regulation by enforcement: We remain concerned about regulators’ increasing reliance on enforcement activity to create new requirements without standard rulemaking processes that would include notice and comment.
We will continue to raise our concerns surrounding the SEC’s share class disclosure initiative and subsequent enforcement activity regarding money market accounts and bank sweeps.
• Modernization and leveraging technology: Throughout the pandemic, firms and advisers have found numerous areas in which operations and compliance practices might be modernized by encouraging regulators to adopt more strategic use of current technological innovations.
With that in mind, we will focus on encouraging regulators to allow greater use of virtual examinations and branch inspections, as well as e-delivery as a default option for client documents and broader use of e-signature and electronic disclosures. We will also seek clarity on the definition of “branch” offices and licensing requirements in the evolving virtual work environment.
We look forward to working with regulators — as well as legislators on both sides of the aisle — to drive progress on these critical topics in 2021 and beyond.
Dale Brown is president and CEO of the Financial Services Institute.
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