Turning Regulatory Progress into Lasting Certainty

FSI has long fought to ensure independent financial advisors can continue doing what they do best: helping Main Street investors pursue their financial goals under clear, workable and fair rules. 

The good news is that the federal landscape has become more hospitable to our industry in recent years, with regulators and lawmakers paying closer attention to issues affecting our members and their clients. However, real progress means creating lasting rules and laws that will not be easily changed by future administrations. 

Here’s the latest update from our advocacy team.

Department of Labor Independent Contractor Proposal

One of FSI’s main priorities remains seeing that the Department of Labor’s (DOL) proposed independent contractor rule is implemented. We sent a formal comment letter supporting the proposal, which would replace the 2024 independent contractor rule with a simpler, more workable approach. 

Clarity is essential for our members. Independent advisors freely choose this model because it allows them to build businesses, hire staff, serve clients personally and create long-term enterprise value. The proposal would replace the current rule with a clearer framework that better reflects how independent financial advisors operate and recognizes that regulatory oversight and supervision are not the same as employer control. Read more here.

FINRA Arbitration Reform

We have also engaged FINRA on its arbitration process. Our members have raised two main concerns in this area.  

First, the quality of arbitrators can vary. Some firms have dealt with arbitrators who seem disengaged and do not fully understand securities issues. For arbitration to be fair, efficient and accessible, decisions should be made by attentive professionals and based on a solid understanding of industry rules. 

Second, it is difficult to dismiss meritless claims early in the process. For instance, sometimes a firm is named in an arbitration case even if the alleged conduct happened before the advisor joined. In those cases, they are forced to spend time and money defending themselves despite having little or no connection to the alleged wrongdoing. 

Clarity for Compensation

FSI continues to support bipartisan legislation to update how independent financial advisors and ensemble practices can receive commission payments. 

Rules have generally required securities commissions to be paid directly to registered individuals, not to the independent advisors’ business entity. As many of our members know, that does not match with how many advisory practices operate today. 

Many of them are a part of ensemble businesses, groups of advisors who come together to hire staff, bring in new advisors, build equity, manage expenses and plan for continuity. Requiring commissions to go only to individuals can complicate payment of business expenses and slow growth.  

In 2025, the SEC issued no-action relief allowing broker-dealers, under certain conditions, to pay commissions directly to an advisors’ business entities. While that was an important step forward, it is not the same as a permanent legislative fix.  

A no-action letter reflects the SEC staff’s current enforcement position. It can be narrowed, withdrawn or reinterpreted differently in future SEC. The legislation we support would provide the certainty that advisors and firms need.

Investor Protection and Main Street Fairness

We also support several legislative efforts to protect investors, strengthen retirement security and update rules that can lead to unfair results for Main Street Americans. 

• The GROWTH Act. It would help long-term mutual fund investors avoid unexpected tax bills. Right now, investors can owe taxes on capital gains within a mutual fund even if they did not sell their own shares. The bill would let investors delay taxes on automatically reinvested mutual fund capital gains until they sell their shares. This is about fairness. Many families use taxable mutual fund accounts to save outside of retirement plans. They should not be punished for staying invested.  

• The Financial Exploitation Prevention Act. This gives firms a clearer way to delay securities redemptions if they suspect a senior or vulnerable investor is being exploited. Advisors and firms are often the first to notice warning signs, but once money leaves an account, it is very hard to recover it. This law would give them a tool to pause suspicious transactions and investigate before assets are lost. 

• Tax Relief for Victims of Crimes, Scams, and Disasters Act. Some victims of scams or theft can lose retirement assets to fraud and still have to pay taxes on money they no longer have. This law would bring back a broader deduction for personal casualty and theft losses, including those from crimes, scams and disasters. Americans who lose retirement assets to fraud should not be taxed on stolen money. 

• The SAFER Act. This deals with state escheatment laws and the early seizure of investment accounts. Some states may call long-term accounts inactive if there is little activity, such as not logging in, not responding to mail or not making contact. This can hurt buy-and-hold investors who leave assets invested for years on purpose. Not being active should not mean an investor has abandoned an account.

DOL Fiduciary Rule and Regulation by Enforcement

Meantime, we also helped win an important legal challenge to a DOL rule earlier this year. It was an important victory for the industry and savers across the country. Still, we know the issue could come back. We remain ready to respond if new rules are proposed. 

At the same time, we continue to push for fair, clear and predictable enforcement at the SEC and FINRA. We are glad to see signs from regulators of a move away from regulation by enforcement. Still, words are not enough. These principles should be made official so they cannot be easily changed by a new administration. 

Looking Ahead 

The policy environment in Washington is more constructive than it has been in recent years, but our focus remains on turning that progress into lasting certainty. Temporary relief, favorable agency signals and improved regulatory posture are helpful, but they can change over time. 

That is why we will continue engaging with lawmakers, regulators and the courts where necessary to protect the independent advice model. Across each of these issues, our goal is the same: making sure independent firms and advisors can serve Main Street investors with choice, confidence and clarity.