2021 Advocacy Year-in-Review

December 14, 2021

Every new presidential administration brings its own challenges, especially when it involves a change in the political party controlling both the White House and Congress. This year’s transition, however, has been notable for the new administration’s changes to the prior administration’s regulations, challenges that key regulatory agencies have encountered as they establish their teams and priorities and the multitude of attacks on advisors’ independent contractor status.

That said, we have continued to drive significant progress on the advocacy priorities that matter to our members this year. Below, our Advocacy team provides a year-in-review perspective on our efforts to protect the interests of our members:

Protecting Independent Contractor Status

On March 9, the U.S. House of Representatives passed the Protecting the Right to Organize (PRO) Act, which would amend the National Labor Relations Act (NLRA) to mandate a more stringent worker classification test for independent contractors and likely re-categorize many advisors as employees of their broker-dealers.

As our members know, we have been watching developments regarding the PRO Act all year. The bill has not advanced in the Senate, as key portions of the Democratic caucus do not support it as currently written.

During the second half of the year, however, concerns arose that provisions of the PRO Act could be included in the budget reconciliation process. Our advocacy team made our opposition to this maneuver a key point of focus in the 82 meetings we conducted with legislators and their staff members throughout the year. We were pleased that the elements of the bill that would have undermined independent contractor status for advisors were eventually removed from reconciliation on procedural grounds.

A second legislative threat to independent contractor status – a bill that would have revised existing unemployment insurance laws by requiring states to use the same ‘ABC’ employment classification test that is included in the PRO Act – could have been incorporated in the budget reconciliation process, since it qualifies as a tax bill.

We and our members mobilized quickly against this bill, with members responding to our call to action with over 19,492 letters to members of Congress. The bill was ultimately not included in the reconciliation process.

Independent contractor status has also been threatened this year by the Department of Labor (DOL), which withdrew a final rule that would have clarified requirements for independent contractor status under the Fair Labor Standards Act (FLSA) based on a common-sense ‘economic reality’ test.

This rule had provided much-needed clarity for advisors, regulators and legislators. Unfortunately, by repealing the rule, the DOL has reinstated the FLSA’s more complex and ambiguous multi-factor test, which has historically left advisors vulnerable to threats to their independent contractor status.

On May 14, we joined a coalition of concerned industry groups in filing an amended complaint against the DOL in the U.S. District Court for the Eastern District of Texas, arguing that the Department not only took a misguided and harmful policy position on this issue, but also failed to meet well-established legal and procedural requirements under the Administrative Procedure Act (APA) for such a drastic move.

Our case against the DOL is proceeding, and we look forward to providing with further updates going forward.

We were also engaged on this issue at the state level throughout the year. Proposals were considered in New York, New Jersey and Minnesota that would have extended employee status to gig economy workers but unintentionally undermined advisors’ independent contractor status.

Our engagement explaining the unintended consequences for independent financial advisors contributed to lawmakers taking a more circumspect approach in New York, although we expect that state’s legislature to revisit this issue again next year. There was little change on the issue In New Jersey and Minnesota.

Additionally, we have filed an amicus brief to protect our members’ interests in a case before the Supreme Judicial Court of Massachusetts regarding the interpretation and application of the commonwealth’s independent contractor law.

Standard of Care Issues

We have been fairly supportive of the Department of Labor’s new prohibited transaction exemption (PTE). The measure, also called PTE 2020-02, takes an important step toward establishing a unified best interest standard of care for our industry by enabling investment advice fiduciaries to recommend a broad range of transactions to retirement investors – including those that would result in advisor compensation from a third party – provided the advisor complies with a best interest standard that is consistent with Reg BI or with an RIA’s fiduciary duty under the Investment Advisers Act of 1940 (in addition to meeting a list of other requirements).

Once the implementation process for the PTE began, we played a key role in facilitating dialogue between our members to help them overcome common hurdles, including the need to develop new systems and processes.

We also effectively conveyed our members’ concerns to the DOL, and were pleased when the Department announced that it would extend its non-enforcement policy by approximately one month in order to allow advisors to use the PTE through February 1, 2022 as long as they abide by its impartial conduct standards. The Department will also hold off on the measure’s documentation and disclosure requirements for rollover recommendations until July 1.

While we have conveyed to the DOL that more time would be helpful, and requested an extension of the temporary non-enforcement policy until at least July 31 in a letter we wrote to the DOL on the issue, we are encouraged that the Department has been otherwise receptive to our input.

In addition, we have worked over the course of 2021 to develop a strong rapport with the new leadership of the SEC, and we are pleased that the regulator has not moved to make substantive changes to Reg BI.

Modernizing Regulation and Leveraging Technology

As a result of our continuous working dialogue with FINRA, the regulator has agreed to extend its temporary policy allowing remote inspections through the middle of next year. With the COVID pandemic continuing to impact companies across the country and uncertainty regarding a possible surge this winter, this extension will provide our members with tangible relief and greater flexibility to operate their firms. The move will also give us and the industry more time to collect data on the effectiveness of remote inspections.

We are further encouraged that FINRA has shown willingness to review this and other rules in order to adapt to the lasting effects of COVID and significant advances in technology.

Regulation by Enforcement

We have continued to support those involved in litigation with the SEC over their receipt and disclosure of 12b-1 fees, and will have filed two amicus briefs in such cases by the end of this year. Our involvement in these cases enables us to highlight in federal court the manner in which the SEC has engaged in rulemaking by enforcement in this area.

We have also been encouraged that the SEC has taken an even-handed approach to its enforcement actions related to Form CRS to date. The Commission has yet to bring an enforcement action under Reg BI.

Retirement Security and Protecting Senior Investors

We were very pleased to see the Securing a Strong Retirement Act, also known as SECURE 2.0, unanimously approved by the House Ways & Means Committee in May. The bill would significantly strengthen Americans’ access to retirement savings vehicles and planning services by further modifying retirement rules and guidelines, and we continue to support its consideration by the full House and Senate.

We further educated legislators on issues surrounding aging and retirement by submitting comment letters / statements for the record for two key hearings before the Senate Finance Committee and the Senate Special Committee on Aging, supporting bipartisan retirement legislation and providing feedback regarding how seniors make financial decisions and the resources they need to support them.

Additional State-Level Advocacy Issues


The legislature in New York considered proposed taxes on equity, bond and derivative sales this year. We engaged actively on these proposals and prevented them from moving beyond the initial steps. We also worked to defeat a transaction tax proposal in New Jersey that had previously been proposed several times.

Data Privacy

The Florida Privacy Protection Act would have put more stringent requirements on companies handling large amounts of consumer data. Unfortunately, it would have exposed our members to increased risk by creating a private right of action, enabling advisors and firms to be sued by clients or even subjected to class action suits.

The bill ultimately failed at the end of April over disagreements between proponents in the state House of Representatives and Gov. Ron DeSantis and state Senate sponsors, who urged limiting the right of action to the state.

A similar measure was introduced in New York. We continue to be in dialogue with legislators in that state to limit the private right of action and protect our members.

Protecting Seniors & Other Vulnerable Investors

Iowa, Nebraska, South Carolina and Hawaii adopted versions of NASAA’s model rule enabling states to protect seniors and vulnerable investors from financial exploitation, bringing the total number of adopters to 33. We support the adoption of the model rule as part of our years-long mission of advocacy for protecting our nation’s senior citizens and other vulnerable investors.

NAIC Model Rule

We supported the National Association of Insurance Commissioners’ model rule regarding suitability for sales of annuities this year, and we are pleased that it has been adopted so far in almost 20 states.

FSI Membership