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READER POLL: Not Much Enthusiasm for Reg BI

Industry Trends and Research

The Securities and Exchange Commission (SEC) has, of course, finally published a new version of Regulation Best Interest, the new Customer Relationship Summary, and more. What do NAPA-Net readers think?

Well, most haven’t really had a chance to get into it; a plurality (45%) said they had started reading it, while another quarter (27%) had relied on NAPA-Net’s coverage and 18% had relied on some other coverage. The rest hadn’t paid it any attention.

As for thoughts on the SEC’s effort, a plurality (44%) had no opinion yet, 28% saw it as worse than the original proposal and about one-in-five saw it as an improvement. The rest viewed it as a good news, bad news effort. As one reader explained, “Good: raises the standard of care brokers owe their customers. Bad: further blurs the lines between brokers and advisers (contrary to one of Chair Clayton's stated goals for the rule).”

Labor’s Labors

Now, it’s been widely reported that the Labor Department is working on an update of its own fiduciary rule, and so we also asked NAPA-Net readers what they thought of that effort in view of the SEC’s new rules. Just over half (55%) said, “it sure would be nice if they were compatible,” 18% were “hoping it improves on the last attempt”, and the rest were just going to “wait and see.” 

As one reader noted, DOL has a completely different mandate through ERISA than the SEC does...not sure how the DOL could legally model its rule on Reg BI which essentially defines best interest like pornography -- you'll know it when you see it (or the SEC enforces it or not).”

Reader Comments

As usual, we got a number of reader comments. Here’s a sampling:

“Reg BI seems very bland and don't think it will have an outsized impact on our business as retirement plan advisors. We will look to the DOL as they move. What is far more worrying is the states entering the fray.”

“I'm just waiting for the inevitable lawsuit before spending too much time diving into this.”

“Reg BI should have preempted the mess of state rules that are being developed.”

“I thought the financial services community needed CERTAINTY, which is why it fought DOL's efforts tooth and nail. Reg BI gives anything but that. It expressly declines to define terms and is incredibly vague when it attempts to explain various concepts. Where is the outrage from the financial services community again?”

“The DOL has jurisdiction over plan level fiduciary activity or the avoidance thereon. Any person that touches an ERISA plan/asset may be subject to these rules and of course subject to rules of their primary regulator determined by account types i.e. brokerage, advisory, directed or discretionary trustee. Let’s face it, all regulators want to sink their teeth into the rollover market. Why? Because that's where the money is. Where there is lots of money, there is a higher potential for abuse. No regulator wants to be accused of not regulating their accounts types for rollovers, so they jump in. I think the major regulatory agencies-SEC, FINRA, OCC and IRS (and maybe the states from a fiduciary and insurance perspective) should develop and adopt uniform rules for rollovers.”

Thanks to everyone who participated in this week’s NAPA-Net reader poll!