FSI Applauds Development and Rollout of SEC’s Regulation Best Interest as Crucial New Rule Goes Into Effect

June 30, 2020

Standard of Care Expected to Protect Investors and Reduce Confusion While Preserving Access to Affordable, Professional Financial Advice

With the arrival of the June 30 implementation date for the Securities and Exchange Commission’s (SEC) new Regulation Best Interest (Reg BI), the Financial Services Institute (FSI) applauds the Commission for establishing a workable, universal standard of care that applies to all financial advisors, regardless of their business model.

“We commend the Securities and Exchange Commission on its development and rollout of Regulation Best Interest, which we have supported since it was proposed,” said FSI President & CEO, Dale Brown. “This critical new rule represents a tremendous step forward in protecting Main Street American investors, increasing transparency and reducing confusion as to the obligations of financial professionals. At the same time, establishing the policies, procedures and systems necessary to comply with such a sweeping change has been a significant challenge, and we commend our members and our industry for their diligent efforts to ensure a smooth implementation process for the new rule. Reg BI provides a workable and business model-neutral framework for serving clients’ best interests while also preserving access to high-quality, professional financial guidance.”

Brown continued, “Looking ahead, we encourage states and other regulatory agencies that are considering their own standard-of-care proposals for investment advice to wait and evaluate whether additional regulation is necessary following Reg BI’s implementation. The alternative – creating a sprawling patchwork of inconsistent and potentially conflicting requirements – would undermine the progress we have made today.”

The SEC’s development of Reg BI came on the heels of the Department of Labor’s (DOL) fiduciary rule being struck down by the Fifth Circuit Court of Appeals in March 2018 as part of a legal challenge brought by a coalition of organizations, including FSI.

The challenge highlighted the unworkable nature of the DOL rule, which was overly vague, unduly burdensome and would have restricted investor choice and access to financial services and products. Leading up to today’s deadline, FSI has assisted members in the implementation process to help ensure a smooth, effective transition to the new standard. FSI worked with the SEC to address industry questions and concerns regarding the new requirements, and it provided workshops where members could collaborate as they worked diligently toward implementation.

FSI looks forward to continuing its dialogue and collaboration with federal and state officials on regulatory solutions that safeguard the interests of retail investors while protecting their access to unbiased, professional financial advice.