A contemplation of Regulation BI


“In contrast to that commotion over the [Department of Labor] rule, it’s been mostly crickets from the brokerage industry when it comes to firms announcing concrete changes they are making … in preparation for Reg BI.”

The above excerpt from this week’s cover story on Regulation Best Interest by Mark Schoeff Jr. underscores the industry’s reaction to the new rule. The similarities between the hue and cry that accompanied the DOL’s fiduciary rule and the pending judicial decision around Reg BI stand out to me.

The reaction is intriguing because this industry’s reputation does not include quietly abiding the intrusion of external forces. As one source in the article suggests, perhaps it’s semantics because “fiduciary” (the ‘F’ word) feels weightier than “Best Interest.” Plus, the implementation guidance of “good faith effort” and “reasonable progress” leave lots of gray area.

But the second issue may well be the reason for the crickets. A hearing Tuesday will determine if the Securities and Exchange Commission exceeded its authority and ignored Dodd-Frank, so perhaps the relative quiet indicates a delay is more likely than the scheduled June 30 implementation.

Ultimately, does strict regulation create a greater burden than best-efforts guidance? Watching the implementation across the industry will answer that intriguing question.

Written by Investors Wallets

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