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House Votes to Block SEC's Reg BI Package


The U.S. House of Representatives approved legislation June 26 that, if enacted, would block the SEC’s newly adopted Regulation Best Interest from taking effect.

Rep. Maxine Waters (D-CA)The Financial Services and General Government Appropriations Act (H.R. 3351) would fund the SEC and a broad range of government agencies for the 2020 fiscal year, which begins on October 1. It includes an amendment offered by  Rep. Maxine Waters (D-CA), chair of the House Financial Services Committee,  that essentially prohibits the SEC – via the annual congressional appropriations process – from implementing the final Reg BI, the Form CRS and the related interpretations. 

The amendment states that none of the funds made available by H.R. 3351 “may be used by the SEC to implement, administer, enforce, or publicize the final rules and interpretations” of the SEC titled: 

  • Regulation Best Interest: The Broker-Dealer Standard of Conduct;
  • Commission Interpretation Regarding the Solely Incidental Prong of the Broker-Dealer Exclusion to the Definition of Investment Adviser;
  • Form CRS Relationship Summary;
  • Amendments to Form ADV; and
  • Commission Interpretation Regarding Standard of Conduct for Investment Advisers.

The bill will now move to the Senate for consideration, where there is sure to be far less support for Waters’ amendment to block the Reg BI.

Previous Displeasure

After the SEC adopted its Reg BI regulatory package on June 5, Waters was quick to weigh in, stating: “The SEC’s final rule ignores the explicit will of Congress and fails to require all financial professionals to abide by a strong, uniform fiduciary standard of care when providing investors with investment advice.” She urged the SEC to rescind the rule, contending that it “could lower the standard that investment advisers currently abide by and mislead investors into thinking that brokers who comply with this new rule are putting their clients’ interests first.”

Previously, in a September 2018 letter to SEC Chairman Jay Clayton, Waters and 34 other House Democrats urged him to revise the then-proposed regulation so that it would require brokers to abide by the same standard that currently applies to investment advisers.

Waters’ effort appears to follow the same playbook that Rep. Ann Wagner (R-MO) employed in trying to stop the Department of Labor’s fiduciary regulation from being implemented. Wagner was an ardent opponent of the DOL fiduciary regulation and each year put forward legislation to repeal it and prevent the DOL from implementing it.