SIFMA wants new SEC to give Reg BI time to work

The major financial industry group said the current agency has vowed for tough enforcement of the rule

The head of a major financial industry trade organization wants the Biden administration’s Securities and Exchange Commission to give the new broker investment advice standard a chance to work before making any changes to the rule.

The majority of the five-person SEC reflects the party of the incumbent president. Regulation Best Interest — which is designed to curb broker conflicts of interest and was approved despite opposition from Democratic commissioners — was the signature rulemaking for SEC Chairman Jay Clayton.

Last Friday, House Financial Services Committee Chairwoman Maxine Waters, D-Calif., urged the Biden administration to rescind dozens of Trump regulations, including Reg BI and a related disclosure document called Form CRS.

But SIFMA chief executive Kenneth E. Bentsen Jr. said the new SEC should assess the performance of Reg BI before revisiting it.

“It’s important for policymakers to look at what’s been done under Reg BI and what the outcome of that is,” Bentsen told reporters during the Securities Industry and Financial Markets Association’s State of the Industry briefing. “The industry has spent tremendous resources in terms of labor and capital preparing [for Reg BI].”

Reg BI was implemented on June 30. The SEC and the Financial Industry Regulatory Authority Inc. provided an update about compliance at a roundtable in late October. Bentsen said that meeting showed the SEC was serious about ensuring Reg BI protects investors.

“The SEC has made it clear that they intend to be robust in their enforcement of it,” Bentsen said.

SIFMA, which represents brokerages, investment banks and asset managers, has been a strong proponent of Reg BI. The brokerage industry led the opposition to the Obama administration Department of Labor’s fiduciary rule, which was vacated by a federal appeals court.

The SEC took the advice-reform lead in the Trump administration and promulgated Reg BI, which applies to rollovers from company sponsored retirement plans to individual retirement accounts.

But investor advocates and many Democrats assert that Reg BI is weaker than the fiduciary duty that continues to govern investment advisers. The Democratic Party platform included a plank vowing that a Biden administration would redo SEC and Department of Labor advice rules approved during Trump’s term.

Another area in which a Democratic-majority SEC might change course from the Trump administration SEC is private market reform. Under Clayton, the SEC advanced rules that would make it easier for start-up companies to raise capital through unregistered securities, or private placements, and would allow more ordinary investors to buy them.

Clayton has announced he will step down by the end of the year.

“We’ll have to see what the new chair is interested in doing,” Bentsen said. “Even though the SEC is an independent agency, they do tend to follow the lead of the White House that appoints them there.”

Bentsen said he’s confident the newly constituted SEC will assess the effectiveness of current regulations in determining whether it will take a new approach.

“Facts on the ground will impact the agenda,” Bentsen said.