A last-minute amendment from Rep. Maxine Waters, D-California, attached to a routine appropriations bill, passed the full House on Wednesday, throwing a shadow over recent SEC regulation.
The SEC’s Regulation Best Interest, known colloquially as Reg BI, had its enforcement funding blocked by the controversial congresswoman.
Waters attached the amendment to H.R. 3351—Financial Services and General Government Appropriations Act, 2020, on Monday, in keeping with House procedures.
The appropriations bill, and the amendment, passed on the House floor with a 244 to 196 vote, with 12 not voting.
“Congress should allow the implementation of Reg BI to move forward and it should be given time to work,” Insured Retirement Institute (IRI), a supporter of the regulation, said in a statement. “This newly adopted rule raises the standard of conduct for financial professionals, expressly requiring them to act in their clients’ best interest. Should efforts to block Reg BI prove successful, the consequence will be to delay and deny American investors of the enhanced protections provided by this rule.”
“Regulation Best Interest ensures investors are afforded strong protections when they receive recommendations from financial intermediaries,” added Investment Company Institute President and CEO Paul Schott Steven. “Passage of this amendment seemingly relitigates the DOL fiduciary rule, which was vacated by the Fifth Circuit Court. Preventing the SEC from implementing Regulation Best Interest creates a legal void that leaves millions of retail savers without critical investor protections. ICI urges Congress to strip this language from the final spending bill.”
Waters had 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.”
Part of a package
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.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.