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Lobbyists Who Killed the DOL Rule Target SEC’s Best Interest Regulation

July 9, 2018

With the Department of Labor’s fiduciary rule now good and dead, the lobbyists who helped orchestrate its demise have turned to the SEC’s proposed Regulation Best Interest, according to Investopedia.

Last month, the Fifth Circuit Court of Appeals officially vacated the DOL’s rule, the Obama-era regulation that purported to require retirement account advisors to put clients’ interests first.

The SEC, meanwhile, is in the middle of a public comment period on its own best interest standard for broker-dealers as well as clarification of fiduciary responsibilities for investment advisors, Investopedia writes.

And the industry groups that were “instrumental” in killing the DOL’s rule — the National Association of Insurance and Financial Advisors and co-plaintiffs including Sifma and the American Council of Life Insurers — are now going after the SEC’s proposed regulations, according to the web publication.

The SEC’s proposal for a client relationship summary, which has a provision to ban broker-dealers from using the term “advisor,” is NAIFA’s first concern, Investopedia writes. After all, most NAIFA members, who are primarily insurance agents and broker-dealer representatives, are not RIAs and are only held to the less stringent suitability standard rather than the fiduciary standard, according to the web publication.

NAIFA argues that if its members can’t call themselves “advisors,” they’ll be barred from offering financial advice, Investopedia writes. That, the industry group claims, would make it harder for them to offer advice to less affluent clients, according to the web publication.

NAIFA’s lobbyists have already met with the SEC, including Chairman Jay Clayton, Investopedia writes.

"NAIFA supports a best interest standard. Since the SEC rule has not been finalized, we have not taken a formal position. We will submit comments," a spokeswoman insists to FA-IQ.

Meanwhile, the Financial Planning Association could be pulling the SEC in the opposite direction, according to the web publication. Its members are certified financial planners, Investopedia writes, and the CFP Board recently approved revisions to its code of conduct that expanded the fiduciary standard to all financial advice.

FPA President Frank Paré recently told FA magazine that a “suitability-plus” standard, which some critics say will be what comes out of the SEC, could sow confusion among investors, according to Investopedia. Paré told FA magazine that talk of a lawsuit targeting the SEC is “premature” but added that it's a “legitimate question,” Investopedia writes. There’s now speculation that the FPA will indeed file a lawsuit against the SEC, according to the web publication.

Editor's note: This story was updated 7/10/2018, 9:30am to add comment from a NAIFA spokeswoman.

By Alex Padalka
  • To read the Investopedia article cited in this story, click here.