SEC Standard of Conduct Proposal Faces 'Arduous Path': Fi360's Aikin

"The big change" in the SEC's proposed standard of conduct proposal is the introduction of the "new best interest standard" for brokers, Aikin told attendees. "We look at this and scratch our head because that's [best interest concept has] been grounded in fiduciary."

Indeed, SEC Commissioners Hester Peirce and Kara Stein both expressed concerns at the April 18 SEC meeting over the Regulation Best Interest title, with Peirce calling it a "suitability plus" rule and Stein saying it was "mislabeled," Aikin noted.

At the Fi360 event, Joe Borg — president of the North American Securities Administrators Association and Alabama securities director — said  that while state securities regulators have been waiting eight years for a "fiduciary" proposal and it's a "good positive first step," the proposal does not "raise the suitability standard in a measurable way."

Borg explained, "I feel like we have a skeleton [with the SEC proposal], and we need to put a lot of meat on the bones."

Dale Brown, president and CEO of the Financial Services Institute, said that while FSI is "still plowing through" the nearly 1,000-page SEC standard of conduct plan, the SEC has set out "very helpful steps in the right direction" and is "asking lots of good questions."

While in "many respects it's eight years too late" for the SEC's proposal, "it's finally here," Brown said.  "We now have something tangible to react to and [to] help the SEC move toward a final product."

Fi360's Aikin stated that having a "fiduciary best-interest standard" under the Investment Advisers Act and a "non-fiduciary best-interest" standard under the SEC's proposed Regulation Best Interest "will be problematic," adding that while there's been investor confusion about the term fiduciary, "we're really not going to have differentiation."

— Check out AARP, States File to Intervene in DOL Fiduciary Appeal on ThinkAdvisor.