An 11th-hour procedural maneuver from Rep. Maxine Waters, D-California, seeks to prevent the Securities and Exchange Commission from fully implementing Regulation Best Interest (Reg BI).
Waters, Chair of the House Financial Services Committee, added an amendment to appropriations, effectively defunding SEC enforcement action related to Reg BI.
Waters attached the amendment to H.R. 3351—Financial Services and General Government Appropriations Act, 2020, on Monday, in keeping with House rules.
It now goes to the House floor for a full vote.
According to the amendment’s language [emphasis ours]:
None of the funds made available by this Act may be used by the Securities and Exchange Commission to implement, administer, enforce, or publicize the final rules and interpretations of the Securities and Exchange Commission titled ‘Regulation Best Interest: The Broker-Dealer Standard of Conduct’ (File No. S7-07-18) published May 9, 2018; ‘Commission Interpretation Regarding the Solely Incidental Prong of the Broker-Dealer Exclusion to the Definition of Investment Adviser,’ (Re11 lease No. IA-5249) published June 5, 2019; ‘Form CRS Relationship Summary; Amendments to Form ADV’ (File No. S7-08-18) published June 5, 2019; and ‘Commission Interpretation Regarding Standard of Conduct for Investment Advisers.
Regulations criticized
Waters slammed Reg BI upon its adoption by the SEC earlier this month, noting, “this rule 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.”
Reg BI is a package of regulations generally considered to be the commission’s answer to the Department of Labor’s efforts to institute a fiduciary standard.
It’s designed to “enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers, bringing the legal requirements and mandated disclosures in line with reasonable investor expectations,” the commission claims.
Under the regs, broker-dealers will supposedly be required to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer.