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July 25, 2024 at 01:12 PM
What You Need to Know
- Reg BI is falling short of its goal, industry leaders including former SEC Commissioner Robert Jackson argued in a recent panel discussion.
- Form CRS needs improvements, Jackson said.
- Reg BI is not enough to protect investors if the DOL fiduciary rule is vacated, the panelists agreed.
The Securities and Exchange Commission needs to step up enforcement actions related to Regulation Best Interest, a panel of industry experts — including a former SEC commissioner — agreed Wednesday during a webinar held by the Institute for the Fiduciary Standard.
When asked by ThinkAdvisor during the webinar what’s next for Reg BI actions at the SEC, former SEC Commissioner Robert Jackson, who’s now a law professor at NYU Law School, responded that while the SEC under chairman Gary Gensler “has done important things on Reg Best Interest … it’s long past time for some enforcement actions to make clear what their expectations are,” and not just release FAQs on the rule.
Reg BI, said Jackson, who voted against the rule when it passed in 2019, ”has not fulfilled all its purpose; in my view, it is one small area where we should be talking about protecting these ordinary investors.”
Joseph Peiffer, president of the Public Investors Advocate Bar Association (PIABA), added in response: “Well, I hope something’s coming. I’m sick of being the front line on this. Really what that means is, that the investors and retirees that we represent are on the front lines of enforcement on this. And what does that really mean? It means that someone has to come to me to get their life savings back.”
The SEC has “got to bring some real enforcement actions, which we just haven’t seen a bunch of, even at FINRA,” Peiffer said.
“The number of Reg BI-related cases brought by FINRA is under 100, in the country,” Peiffer continued. “They have the vast resources of the SEC, and I’d like to see them do something with it.”
Dearth of SEC Actions
Law firm Gibson Dunn stated in late June that while there’s been a dearth of enforcement actions brought by the SEC related to Reg BI, more inquiries by the securities regulator are likely on the way.
The law firm stated that the SEC thus far “has seemed content” to leave enforcement to FINRA, which has settled roughly 30 Reg BI enforcement matters since 2020, when Reg BI took effect.
Rina Hussain, associate director of the SEC’s broker-dealer exam program, said at the SEC Speaks conference held by the Practising Law Institute in early April that Reg BI will continue to be an exam priority for the SEC in 2025 — with likely areas of focus to be on complex or illiquid products.
FINRA has more enforcement cases related to Reg BI as the disciplinary actions “have been increasing,” Bill St. Louis, head of FINRA enforcement, said on April 22. “We have brought cases involving the Customer Relationship Summary form (Form CRS), excessive trading, complex products and variable annuities, with more in the pipeline,” St. Louis said.
