Goodbye Reg BI? Democrats vow tougher advisor regulation

Former Vice President Joe Biden, 2020 Democratic presidential candidate, smiles during a campaign event in Detroit, Michigan, U.S., on Monday, March 9, 2020. Biden said that he would be a bridge to a new generation, restoring the country’s values following Donald Trump’s presidency and then leaving the country to younger leaders. Photographer: Erin Kirkland/Bloomberg
Register now

Is Reg BI long for this world?

If the Democrats have their way, probably not.

The Democrats’ draft party platform does not name the SEC’s Regulation Best Interest, but it takes aim at its spirit. Financial advisors “should be legally obligated to put their client's best interests first,” according to the document which became available last week.

The draft goes on to promise “immediate action to reverse the Trump administration's regulations allowing financial advisors to prioritize their self-interest over their clients' financial wellbeing.”

The document augers a big regulatory shift away from the SEC’s approach in Reg BI, which is not a fiduciary rule and is reliant upon disclosure. Critics, including Democratic Senator Elizabeth Warren, have charged that the commission was too permissive of conflicts of interest.

Of course, the draft document could change in the weeks ahead. Plus, party platforms are aspirational. Once in power, parties aren’t obligated to carry out their provisions. For instance, the Republican Party’s 2016 platform included prioritizing repeal of the Affordable Care Act, but the party did not do it even though it controlled the White House and both houses of Congress after the election that year.

Still, the Democrats’ draft indicates how advisor regulation could swing back in the direction of more stringent rules after the November election.

DoL overhauls retirement rules. Here’s what advisors need to know
The Labor Department’s short comment period is one reason to get up to speed, fast.

During President Trump’s tenure in office, his administration has pursued a broadly deregulatory agenda and a more accommodative approach toward conflicts of interest among advisors and brokers. The Department of Labor recently proposed replacing the vacated fiduciary rule with a new regulation that gives advisors more exemptions from fiduciary responsibilities. The department is headed by Secretary Eugene Scalia, who as a private attorney led the charge to vacate the Obama-era fiduciary rule.

The Democrats’ proposed party platform would also prioritize strengthening Social Security and rejecting efforts to cut benefits or raise the retirement age. Additionally, the proposed platform would support reforms to permit states and cities to create public retirement account options to facilitate Americans’ ability to save for retirement.

For reprint and licensing requests for this article, click here.
Regulation Best Interest Regulatory reform Election 2020 Joe Biden SEC Fiduciary standard Fiduciary Rule