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Why State Watchdogs Want SEC’s Regulation Best Interest to Succeed (Even as Some Create Their Own Fiduciary Rules)

March 8, 2019

Despite a recent comment letter to the SEC calling for more guidance in its Regulation Best Interest proposal, state regulators do in fact want it to succeed, according to news reports.

In a comment letter sent last month to the SEC, the North American Securities Administrators Association suggested the commission should be skeptical of the support Reg BI received from the same groups that “fought tooth and nail to overturn” the Department of Labor’s fiduciary rule.

That rule purported to require retirement account advisors to put clients’ interests first but was killed in the courts last year.

But Michael Pieciak, Vermont commissioner of financial regulation and NASAA’s president, tells InvestmentNews that the letter wasn’t meant to be critical.

"We want to see the SEC succeed; we want to see the rule succeed," Pieciak tells the publication. "We think they should clarify their guidance and provide examples of how the rule will play out in specific factual scenarios."

What’s more, NASAA is distancing itself from the state-level fiduciary rule initiatives underway in New Jersey and Maryland, according to InvestmentNews.

"A lot of stakeholders at the local level want to protect investors, want to protect citizens in their states, and that's their prerogative," Pieciak said on Capitol Hill earlier this week as part of an event about the group’s legislative agenda, according to the publication. "We have been as an association focused on engaging with the SEC, trying to provide as many comments, as much direction as to how we think it can be improved as possible because we think that's the most valuable use of our time right now."

Yet NASAA has explicitly backed Nevada's efforts. In a comment letter Thursday the organization said state's fiduciary proposal would increase investor protection, InvestmentNews reports.

This week the Insured Retirement Institute also released its legislative and regulatory agenda, and the group also says it supports Reg BI, InvestmentNews writes.

House Democrats, meanwhile, aren’t convinced the regulation goes far enough to protect investors, according to the publication.

"When you have investment advisers who are not acting in [clients'] best interests but acting in their own best interests, it does not bode well for our senior investors in particular," Rep. Maxine Waters, D-Calif., the new chair of the House Financial Services Committee, said after a Capitol Hill press conference on an unrelated topic earlier this week, according to InvestmentNews. "We're going to continue to pay some attention to that."

Waters had been a vocal supporter of the DOL’s rule, and last year sent a letter to SEC chairman Jay Clayton questioning whether the commission’s regulation would raise requirements on brokers from the current suitability standard, the publication writes. The House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets will host a hearing on Reg BI Thursday.

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