The SEC is likely to roll out its proposed Regulation Best Interest in the third quarter despite the seven-week government shutdown significantly slowing down the regulator’s progress, said Neil Simon, vice president of government relations at the Investment Adviser Association, according to news reports. However, 11 former SEC senior economists say the proposal is based on “weak and incomplete” economic analysis.

“It’s going to happen,” he said at the TD Ameritrade National LINC conference in San Diego last Friday, according to ThinkAdvisor.

Simon also said there are rumors that the new House Financial Services Committee Chairwoman Maxine Waters, D-Calif., is planning a March hearing to question SEC Chairman Jay Clayton on the advisor and broker conduct proposal, according to the publication. And the SEC is likely to face complications given that Clayton needs three votes to pass the proposal and it’s unclear if he has them on the four-person commission while the White House stalls on filling the Democratic seat left open by the December departure of SEC Commissioner Kara Stein, Simon said, according to ThinkAdvisor.

The proposed regulation, according to Simon, is “pretty broker friendly” and ambiguous in several areas, such as essentially saying that a broker has to abide by the regulation when offering investment advice but not otherwise, ThinkAdvisor writes.

Simon is also critical of what he said is a lack of clarity on dual registrants and called the proposal’s Customer Relationship Summary disclosure form “a mess,” according to the publication.

But there are likely to be several changes to the proposal, particularly on Form CRS, Simon told ThinkAdvisor.

Meanwhile, individual state fiduciary rule initiatives, such as the one introduced in Maryland’s state senate earlier this month, “will make compliance very, very complicated,” Simon said at the conference, according to the publication.

The SEC’s proposal is also facing criticism from former senior economists at the commission, according to Bloomberg. A group of 11 former SEC officials have slammed the rule as it stands now in a comment letter, claiming the proposal is based on “weak and incomplete” economic analysis, the news service writes.

“We find it worrisome that the proposal’s economic analysis does not fully consider some potentially important dimensions of the retail client-advisor relationship,” they wrote Feb. 6, according to Bloomberg. “We encourage the commission to do better.”

Jay Clayton

The letter was signed by, among others, Charles Cox, chief economist at the SEC from 1982 to 1983, Susan Woodward, who held the role from 1992 to 1995, all the way to Mark Flannery, who was the SEC’s chief economist from 2014 to 2016. Among other issues, the former officials are critical of the way the proposal tries but allegedly fails to address a perceived economic problem in the first place.

“Nowhere does the EA emphasize that an advisor’s compensation provides numerous opportunities for her to favor one investment over another on the basis of the compensation it pays to her or to her firm,” they write.