As the new administration continues to ramp up with confirmations of President Biden’s Cabinet nominees and a wide range of other initiatives, its actions on headline topics like the pandemic response, climate change and economic issues are drawing the bulk of the nation’s attention. For our members, however, the new administration’s approach to regulation will be among the most consequential outcomes of last year’s elections.
At FSI, we are eager to work with the new nominees and other officials whose actions and policies will have profound impacts on our industry, including Gary Gensler and Marty Walsh, President Biden’s nominees for SEC Chairman and Secretary of Labor, respectively. It will be critically important in the coming weeks and months that these policymakers engage with the independent financial services industry as they begin to solidify their regulatory priorities.
With that in mind, our team will be laser-focused on building and strengthening productive, solutions-oriented working relationships with these new regulators in order to educate them on our 2021 advocacy priorities, including:
Issues Impacting Clients
Standard of Care Issues
We have strongly supported the SEC’s Regulation Best Interest (Reg BI), which has successfully established a common standard of care for advisors across our industry. We are encouraged by initial indications that Mr. Gensler will likely keep Reg BI in place if he is confirmed. However, it will be a high priority for us in 2021 to ensure that the SEC and other regulators understand that Reg BI has been very effective in accomplishing its goals of increasing transparency and clarifying advisors’ obligations of care as currently implemented.
We will be keenly focused on guarding against any efforts to modify Reg BI in ways that would make this landmark rule overly burdensome or unworkable.
We will also work to ensure that the efforts at the Department of Labor and in the states do not lead to the creation of a conflicting patchwork of standard of care rules.
Improving Financial Literacy and Diversity
Strengthening financial literacy – from grade school to adulthood – is one of our longstanding areas of focus. In 2021, we will continue to proactively support financial education efforts such as financial literacy events in our members’ Congressional districts with members of Congress and others. We will also continue to support diversity, equity & inclusion efforts intended to expand the industry, making it more inclusive for clients and advisors of all backgrounds.
Preventing Financial Exploitation of Vulnerable Adults
We will continue to support the adoption of the NASAA model law protecting seniors from financial abuse. In addition, we will support FINRA’s efforts to provide additional tools and flexibility to help firms combat suspected financial abuse, such as longer hold periods on disbursements and other transactions when financial abuse is suspected.
Issues Impacting Firms and Advisors
Retirement and Tax Issues
With budget issues intensifying in various states, we will vigorously oppose efforts to create or expand taxes that would burden our members, including taxes on financial services and transactions or professional privilege taxes. We will also fight to preserve beneficial treatment for capital gains.
Additionally, we will continue our efforts to protect advisors’ independent contractor status at both the federal and state levels – a topic that impacts tax treatment for advisors along with a wide range of other areas that are crucial to their business models. You can read about our efforts to protect independent contractor status at the federal level in “Defending Independence: Status of the PRO Act”.
On the retirement policy front, we will continue to advocate for the passage of SECURE 2.0, which provides common-sense incentives and protections to expand access to qualified retirement plans, among other key provisions.
Reducing Burdens on Advisors and Firms
We will continue to seek relief from the SEC to allow the payment of securities transaction income directly from independent financial services firms or investment advisers to business entities operated by financial advisors.
Issues Impacting the Industry
Regulation by Enforcement
We remain concerned about regulators’ increasing reliance on enforcement activity to create new requirements without standard rulemaking processes that would include notice and comment. We will continue our efforts to raise awareness of this problem on Capitol Hill and elsewhere through measures like our petition for rulemaking regarding the SEC’s share class selection disclosure initiative (SCSDI) last year. The petition helped bring this problem to the attention of Senate Judiciary Committee Ranking Member Charles Grassley (R-IA) and Senator Tom Cotton (R-AK), among others.
This year, we will continue to raise concerns surrounding the SCSDI and the SEC’s subsequent enforcement activity regarding money market accounts and bank sweeps.
Modernization and Leveraging Technology
Throughout the pandemic, firms and advisors have found numerous areas in which operations and compliance practices might be modernized by encouraging regulators to adopt more strategic use of current technological innovations.
With that in mind, we will focus on encouraging regulators to allow greater use of virtual examinations and branch inspections, as well as e-delivery as a default option for client documents and broader use of e-signature and electronic disclosures. We will also seek clarity on the definition of “branch” offices and licensing requirements in the evolving virtual work environment. You can read about these efforts in greater detail in “2020’s Silver Lining: A Chance to Modernize Regulation Based on Advances in Technology“.
With the influx of new legislators on both sides of the aisle, new leaders at key agencies and the Biden administration’s new approach to regulation overall, building productive working relationships while at the same time expanding on existing ones will be crucial this year. With that in mind, we will be reaching out to members to ask for your support and engagement by lending your voice to our advocacy efforts.
We look forward to working with our members, regulators and legislators of both parties to drive progress on these critical topics in 2021, and to continuing the tremendous positive strides we have made in recent years toward securing a more business-friendly environment for firms, advisors and their clients.