Skip to content

DOL Fiduciary News: April 20, 2018

Please Note:

These links will take you directly to the homepage of the website that features the article.

To reach the article directly, copy and paste the article title into the search feature on the homepage of the publication website.

SEC Rules Not Likely To Hit Insurance Agents

InsuranceNewsNet; April 19, 2018

Investment advice rules announced Wednesday by the Securities and Exchange Commission, if finalized, will have a broad impact across the financial services industry.

The commission voted 4-1 to advance a package of three rules, kicking off a 90-day public comment period.

The SEC rules are viewed as a potential replacement for the controversial Department of Labor fiduciary rule, which was tossed out by an appeals court last month. The government is almost certainly not going to appeal that decision, said Bradford P. Campbell, an attorney at Drinker Biddle & Reath and former head of the Employee Benefits Security Administration, the department responsible for the fiduciary rule.

“The SEC no longer has to adjust itself to fit what the DOL has already done,” Campbell said. “The SEC can now lead the way and have the DOL adjust itself to the SEC’s rule.”

Although the SEC’s rules package is more than 1,000 pages, a clearer picture of the rules' impact emerged Thursday. Here is who will be affected.

  • Broker-dealers: Tougher standards that require B-Ds to put clients' financial interests ahead of their own, identify and mitigate financial conflicts and stop using the terms "adviser" or "advisor" to describe themselves.
  • Insurance agents: No apparent impact, according to several analysts. “We are still digesting the mountains of paper. However, our initial assessment does not indicate that insurance-only professionals making recommendations are impacted by this regulation,” said Kim O’Brien, CEO of the Americans for Annuity Protection.

Democrats Kara Stein and Robert Jackson sharply criticized the proposals, while Republicans Michael Piwowar, Hester Peirce and Chairman Jay Clayton generally praised the package as a positive step forward.

Advisors Rocked by SEC's Proposed Advisor Conduct Rule

Financial Advisor; April 19, 2018

The investment advisor industry has been left scratching its head over a controversial new advisor conduct rule that was among three proposals the Securities and Exchange Commission approved by a 4 to 1 vote late Wednesday.

“The Adviser Standard of Conduct” proposal seeks to expand advisors' current duties and disclosure, while pushing for federal licensing, net capital requirements, a fidelity bond mandate and continuing education requirements.

The proposal, open for public comment for 90 days, has come as a shock to the advisor industry, which met numerous times with SEC Chairman Jay Clayton and SEC staff over the past 11 months as the agency worked on the proposal. Yet the industry now finds itself caught off guard.

The new advisor standard of conduct seeks to codify and collect in one place all of the numerous court and regulatory decisions that the investment advisor fiduciary standard has been built on over the past 80 years.

But even commissioners wonder if the proposal goes too far and may in fact distract from the larger package of proposals the SEC approved.

The package includes a “Regulation Best Interest” for brokers that falls short of a fiduciary standard and a new four-page client disclosure form that will require advisors and brokers to disclose fees, conflicts of interest and whether or not they provide ongoing account service to clients.

SEC Rule: Brokers Can't Pose As Advisors, May Become RIAs

Financial Advisor; April 19, 2018

There is no doubt that the Securities and Exchange Commission’s new package of “best interest” proposals seems like a huge win for B-D associations, including the Financial Services Institute (FSI) and the Securities Industry and Financial Markets Association (Sifma).

On the heels of handily defeating the DOL fiduciary proposal on court appeal in March, the industry's lobbying has no doubt found its mark in round one of the SEC’s proposed rulemaking. As critics, including three SEC commissioners, have pointed out, the agency’s proposed “Regulation Best Interest” surprisingly fails to even define an investor’s "best interest," let alone institute a fiduciary requirement on broker-dealers.

But—and it’s a huge but—what the SEC’s nearly 1,000 pages of new proposals does accomplish is clear: They require B-Ds to make clear to the investing public that their brokers are salespeople who do not offer continuing advice or account maintenance and are not trusted fiduciary advisors. In fact, a broker will no longer even be able to pose as an investor’ trusted “advisor” or “adviser” since the SEC’s new proposals prohibit them from using either word as a title.

While B-Ds and wirehouses may like the fact that they don’t have to transform all of their brokers into fiduciary advisors overnight, it doesn’t mean they might not like to, say, in a year or so.

SEC's Broker Conduct Rules Lack Clarity, Industry Watchers Say

ThinkAdvisor | April 19, 2018 at 03:59 PM

While industry officials were busy Thursday combing through the more than 1,000-page standard of conduct rule package approved Wednesday by the Securities and Exchange Commission, initial consensus is that the agency’s once-promised uniform fiduciary standard for brokers and advisors has morphed into a “suitability plus” standard for brokers and what could likely result in a more onerous fiduciary process for registered investment advisors.

The package, “in lieu of a uniform fiduciary standard applicable to investment advice by brokers and investment advisors, is very disappointing, but not a surprise given earlier reports that the Commission was leaning toward a ‘suitability-plus’ standard for the brokerage industry,” said Duane Thompson, senior policy analyst at Fi360, a fiduciary education, training and technology company.

Fi360’s “immediate reaction,” Thompson said, “leaves us in full agreement with Commissioner [Kara] Stein’s comments during the open meeting yesterday that the SEC squandered a golden opportunity to act in the best interest of investors.”

The rulemaking package, consisting of three parts, “is going to take time to properly digest,” Larry Stadulis, a partner at Stradley Ronon in Washington, told ThinkAdvisor on Thursday.

Little Love for SEC ‘Best Interest’ Proposal

Retirement Income Journal; Thu, Apr 19, 2018

By Kerry Pechter

By a 4-1 vote this afternoon, the Securities & Exchange Commissioners approved their department’s proposal for what it called “Regulation Best Interest.” The public will get 90 days to comment on it, after it is published in the Federal Register.

In her dissent, Obama-appointee attorney Kara Stein blasted it as “maintaining the status quo” and “protecting broker/dealers, not the customers.” In favor were Trump-appointees chairman Jay Clayton, Hester Peirce, and Robert J. Jackson, Jr., (all attorneys) and Republican economist Michael Piwowar (an Obama appointee).

None seemed enthusiastic about the thick 1,000-page proposal, which calls on SEC-regulated intermediaries to act in the clients’ best interest; disclose duties, fees and conflicts in a four-page Client Relationship Statement; and not use the title “adviser” or “advisor” if they aren’t one.

For statements by the commissioners, click here --


The proposal is “principles-based.” Like ineffective proposals of the past, it requires “reasonable,” not stringent, efforts to protect consumers. Not much was said about accountability. And it relies on disclosures, which were categorically ridiculed during the recent Mark Zuckerberg Facebook hearings in the Senate and which virtually everyone in the financial industry knows go unread by most investors

SEC Adds Fuel to the Best-Interest Fire

Morningstar (commentary); 19 Apr 2018

By Aron Szapiro, director of policy research at Morningstar

Many of us probably have fiduciary rule whiplash. On March 15, a court struck down the Department of Labor's rules package, known as the fiduciary rule, placing in limbo the new rules as we wait to see if the agency appeals.

Last night, the Securities and Exchange Commission weighed in in a big way, dropping their version of a fiduciary standard late after a vote of 4 to 1. The SEC has the ball now, and it wants to run with it.

Before we dive into the proposal, it is important to keep in mind that this rules package is a proposal. The Department of Labor changed its final rule from the initial proposal, and we can expect the SEC to make some adjustments. Every commissioner who voted for the package expressed concerns with some aspects of the 1,000-page package and expressed a desire to push for changes and clarifications before voting to pass a final rule. Still, we expect the general principals will underpin the final rule.

What's the bottom-line?

This is potentially a major change to how the SEC thinks about regulating the conduct of financial advisors. The rule aims to hold financial professionals to higher standards of conduct, even if they are registered as broker/dealers rather than as advisers. Although the SEC has had the authority to write these kinds of regulations since 2010, earlier efforts petered out in 2013 before the Department of Labor took on its fiduciary rule project.

Regulators have worried for some time that the incentives brokers have may lead them to give conflicted advice compared to registered advisors, and ordinary investors generally do not know the differences between financial professionals. In fact, we just published a paper ( discussing how regulating advice – despite being one of the key tools the government uses to help investors – has been uneven and confusing for investors. That's a big part of the reason many in industry and advocacy groups have been calling on the SEC to propose a uniform standard of advice. From a first read, this SEC rule appears to address some of our concerns with the regulation tool.

Since the rule comes in at over 1,000 pages, it is going to take some time to fully analyze the package, but here are four key points that jump right out from a first read...  

Did you accomplish the goal of your visit to our site?

Yes No