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SEC’s New Best Interest Standard Met With Mixed Reviews


Earlier this week, the U.S. Securities and Exchange Commission approved the SEC’s Regulation Best Interest: The Broker-Dealer Standard of Conduct (Regulation BI). The SEC started working on the Reg BI project after the U.S. Department of Labor started experiencing difficulties in implementing its own fiduciary rule regulations, according to a recent article from ThinkAdvisor. The new regulation is set to have a compliance date of June 30, 2020.

The new standard will require broker-dealers to act in investors’ best interest when making investment recommendations, and as expected, the regulation is being met with mixed opinions. The Securities Industry and Financial Markets Associations claim the new regulations appear to be tough, while the Financial Planning Associations believes the Reg BI standard falls short of what a fiduciary rule would provide. The following is a brief look at what four major life and annuity groups are claiming.

American Council of Life Insurers (ACLI)

“Reg BI strikes the right note – arming people with the information they need to make good purchasing decisions while safeguarding their access to a broad selection of solutions to secure their retirement,” said ACLI President Susan Neely. “Protecting consumers does not mean limiting their choice of products and services.”

Neely suggested that the Reg BI is more sensible and sustainable than the DOL’s fiduciary rule. She added that the ACLI would like to see the SEC continue to work with the National Association of Insurance Commissioners and the Labor Department on a harmonized and uniform standard of care for investment advice.

National Association of Insurance and Financial Advisors (NAIFA)

According to NAIFA Chief Executive Officer Kevin Mayeax, the new best interest standard “addresses perceived shortcomings in consumer protection without placing undue barriers between insurance and financial professionals and their clients.” Reg BI “preserves the ability of Main STreet investors to receive needed products, services, and advice by not favoring one business model over another,” Mayeux added.


Marc Cadin, AALU President, said his group appreciates the SEC’s effort to ensure that the standard of care for broker-dealers and registered investment advisors is appropriate and protects consumers.

“We support a best interest standard that preserves commission-based business models as well as product choice and access to professional financial advice,” he said. But “there are a number of key areas where the ultimate impact on consumers is unclear,” Cadin added.

One of the concerns is the Form CRS update, Cadin stated.

“AALU supports clear and simple disclosure of roles, obligations, product offerings, and material conflicts, and we will be examining the extent of the SEC’s focus on layered disclosure in the final rule that guides consumers to additional information,” AALU said.

Insured Retirement Institute (IRI)

IRI released a statement that it’s carefully reviewing the final Reg BI rule in detail. Jason Berkowitz, IRI chief legal and regulatory officer, said that IRI supports the principle that financial professionals should be required to act in their clients’ best interest.

“IRI will review and evaluate this extensive new regulation and will work with the [SEC] to advance toward a new era of enhanced investor protection,” Berkowitz stated.

Written by Rachel Summit

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