The SEC’s proposed advice rule and efforts to strengthen Finra will be among the critical areas next year
With the Department of Labor fiduciary rule overturned and the SEC’s effort to advance a more workable common standard of care for all advisers well under way, the regulatory outlook for our industry is much more positive than it was several years — or even 12 months — ago.
As our members know, however, the Financial Services Institute is not only focused on fighting today’s advocacy battles on behalf of our member firms and advisers, but on helping them continue to adapt to the forces of change that are a constant part of our industry.
As we discussed at our recent FSI Forum event, no one knows exactly what lies ahead for independent firms and advisers in 2019. However, in a general session interview I conducted with Bari Havlik, the Financial Industry Regulatory Authority Inc.’s new executive vice president for member supervision, and in a separate panel discussion featuring members of the FSI advocacy team, we outlined some of the steps we are taking to leverage our experience in educating lawmakers and regulators and our strong reputation for constructive dialogue to influence the direction of upcoming change in the following critical areas:
- The SEC’s Regulation Best Interest proposal. FSI is committed to working just as hard to help the Securities and Exchange Commission advance a thoughtful and productive common standard of care as we did to oppose the DOL’s unworkable fiduciary rule. We have been very pleased to see that chairman Clayton has made the SEC’s Reg BI proposal a central part of his agenda.
FSI has authored dozens of comment letters in recent years addressing this issue. Despite this, we are not assuming that Mr. Clayton and his team are familiar with our position. We are taking every opportunity to speak with leaders throughout the SEC to make sure they understand the unique perspectives and concerns of independent firms and advisers.
We are highly supportive of the SEC’s efforts on this front so far, and we will continue to work closely with them to help advance the best rule possible.
2. Ongoing efforts to strengthen Finra, in member supervision and elsewhere. Ms. Havlik noted during our interview that she has been conducting her own listening tour with Finra members, similar to the effort CEO Robert Cook undertook when he started. She has received extensive input on strengthening coordination between Finra’s multiple exam programs, ensuring consistency in interpretations of rules and findings, and reducing the time required to conduct exams, among other areas.
As part of our ongoing dialogue with Finra, FSI stands ready to work with leaders throughout the organization to identify constructive ways to make progress toward these goals. As Ms. Havlik pointed out, Finra has made a concerted effort to better educate its examiners on the nuances of the independent advisory business model — an effort we and our members greatly appreciate.
As Finra continues to work on these goals and others — such as utilizing technology to better leverage the information it routinely collects throughout the year — FSI looks forward to continuing to work with the organization to drive productive solutions.
3. Educating incoming legislators. Regardless of competing predictions about a red or blue wave in the November elections, one thing we know for certain is that there will be a large number of first-term legislators arriving in Washington, thanks to the high number of senators and representatives who have announced their retirement.
Many freshmen lawmakers come to the Capitol without a strong understanding of the independent financial services industry, but with a willingness to learn and a desire to form relationships that can help them drive positive legislation. We look forward to welcoming these new legislators to D.C. next year, and to the opportunity to educate them on the business models and priorities of independent advisers.
4. Influencing legislation and regulation in the states. We also continue to focus on the rapid legislative and regulatory changes that can occur at the state level. Several states are exploring options for extending fiduciary protections to investors. For example, at the urging of the governor, the New Jersey Bureau of Securities recently released a pre-proposal that would create a fiduciary standard in that state, and we are still waiting on the final fiduciary proposal from the Nevada Secretary of State’s securities division.
While we share the goal of ensuring that all investors receive advice that is in their best interest, state-specific standards would lead to a confusing and counter-productive patchwork of varying requirements across the country.
FSI will continue to leverage the substantial resources we have invested toward developing relationships with state regulators and lawmakers to find better solutions to important challenges such as these in the year ahead.
The only safe prediction for 2019 is that change will continue to be a constant factor in our industry. By building on our reputation for productive dialogue and our commitment to educating lawmakers and regulators on the crucial role independent advisers play in their clients’ lives, however, FSI is working to anticipate and influence the direction of this change in positive ways on our members’ behalf.
By Dale Brown
Appeared in InvestmentNews