The broker-dealer industry has its knickers in a twist regarding the proposed amendment to prohibit the SEC from implementation of the new conduct rules for brokers and advisors.
As a consequence, they’ve been inundating the House with letters asking members to oppose the amendment.
House Financial Services Committee Chair Maxine Waters introduced the amendment, which would prohibit the Securities and Exchange Commission from “implementing, administering, enforcing or publicizing the final rules and interpretations” of the best interest rules approved on June 5th. Waters contends that the rule is not in the interest of consumers because it doesn’t hold brokers to the same standard as registered investment advisors.
The Republican-dominated Senate is very unlikely to pass the amendment, but the industry is still not taking any chances and carrying on the mail campaign. SIFMA President and CEO Kenneth E. Bentsen Jr. says “It makes no sense to halt the orderly implementation of this important new set of regulations that would provide strong investor and consumer protections for forty-three million households.”
Bentsen also notes that the regulation is “the most comprehensive enhancement of standard of conduct rules governing broker-dealers” since the Securities and Exchange Act of 1934. SIFMA holds that the regulation is equivalent to, and in some cases, exceeds the standards of the Investment Advisers Act of 1940.
Even if Representative Waters’ amendment is passed, brokers will still need to implement the regulation, but with the provision that FINRA would enforce the rule for broker-dealers. Consumers would be able to bring claims of violations through FINRA arbitration, but the SEC would not be able to bring enforcement actions. The SEC would also be prevented from educating consumers regarding provisions of the rule.
For more information, please read:
Reg BI Defunding Amendment Opposed By Broker-Dealers | Financial Advisor Magazine