Reg BI roundup: Where the rule stands in October

October 18, 2019 by Kelton Corcoran

about the author:

Kelton Corcoran

Senior content marketing specialist

Kelton Corcoran is a senior content marketing specialist at Advicent, the financial planning technology provider of choice for nearly 100,000 financial professionals.

November 5, 2019, will mark five months since the Securities and Exchange Commission officially passed a new regulatory standard applying to broker-dealers: the Regulation Best Interest Rule (Reg BI). The rule aims to strengthen the standards previously set forth by the suitability rule and bring broker-dealers in closer regulatory competition with Registered Investment Advisors (RIAs).

In the time since our last article “The state-level fight against Reg BI,” new challengers have emerged in the fight against Reg BI and new resources have been made available to help broker-dealers prepare their practices for the new rule.

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Where the fight sits in October

The fight continues

Three states have had their public comment periods for proposed strong regulations end in 2019: Massachusetts, New Jersey, and Nevada. So far, all three have yet to reach a final ruling.

On September 30, the Boston Globe reported that another wave of criticism would be coming towards the state’s primary advocate for increased regulations, Massachusetts Secretary William Galvin. The report stated that the Greater Boston Chamber of Commerce plans to mail a memo to its thousands of chamber members aimed at building public opposition to Galvin’s proposal. The public comment period for the proposal ended on July 26.

Though it was previously speculated that New Jersey could reach a final ruling on its fiduciary rule proposal this fall, New Jersey Bureau of Securities chief Christopher Gerold said there is not an official timetable for a decision. On October 10 at the Practising Law Institute’s Broker-Dealer Regulation and Enforcement 2019 seminar, Gerold reaffirmed his stance on the proposal despite the threat of being preempted by the Reg BI rule.

New entrants to the battle

On Monday, September 9, a group of eight state attorneys general combined to sue the SEC in hopes to block Reg BI from moving forward. The group consists of New York, California, Connecticut, Delaware, Maine, New Mexico, Oregon, and the District of Columbia.

Leader of this coalition, New York Attorney General Letitia James, said in a statement “With this rule, the SEC is choosing Wall Street over Main Street. Instead of adopting the investor protections of Dodd-Frank, this watered-down rule puts brokers first.”

On the following day, XY Planning Network also filed a suit against the SEC. In a statement following the filing, XY Planning Network co-founder Michael Kitces said that with Reg BI “fiduciary competitiveness is being damaged.”

New resources made available

On October 8, the would-be enforcer of Reg BI, the Financial Industry Regulatory Authority (FINRA), made several new resources available to assist member firms in their efforts to comply with Reg BI. These are accessed through a new FINRA webpage that aggregates information on the rule, recent news, and a checklist for firms to leverage. This checklist includes step-by-step actions for firms to take in order to determine their state of compliance. These not only include items defined by Reg BI, but also Form CRS.

Additionally, FINRA plans to hold a slate of in-person meetings and workshops to assist firms with their compliance efforts. Highlighting the schedule is a one-day Reg BI conference that will be held on December 18, 2019, in Washington, DC. The conference will be free to attend for the first two attendees per firm. More information on these events can be found on the FINRA events page.

Moving forward

With the increased pushback from the suits filed by eight states and the XY Planning Network, some industry experts believe the Reg BI timeline could be delayed. Currently, Reg BI is still scheduled to be implemented on June 30, 2020.

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