Without mentioning the regulation by name, Democrats took aim at Regulation BI, the Securities and Exchange Commission’s broker advice rule in an early draft of its party platform, and vowed to reverse the regulation if Biden beats President Trump in the 2020 election. The news was first reported by InvestmentNews.
“Democrats believe that when workers are saving for retirement, the financial advisors they consult should be legally obligated to put their client’s best interests first,” stated the newly released draft 2020 Democratic Party Platform. “We will take immediate action to reverse the Trump Administration’s regulations allowing financial advisors to prioritize their self-interest over their clients’ financial wellbeing.”
The SEC’s Regulation Best Interest, which had a compliance date of June 30th, claims to go beyond the suitability standard and requires broker-dealers to act in the best interest of their retail customers when making an investment recommendation of any securities transaction or investment. The SEC also requires brokers to provide clients with a standardized disclosure document about the nature of their relationship.
Opponents of the regulation argue that it does not define the “best interest” and exacerbates existing confusion among investors who are unsure about the standards their broker must observe. Proponents believe that the rule establishes a national standard that helps protect investors while preserving access to professional financial advice.
On the eve of Reg BI’s compliance date, the Department of Labor unveiled its fiduciary rule proposal that would replace the now defunct Obama era regulation.
The original DOL fiduciary rule broadened the definition of investment advice fiduciary under the Employee Retirement Income Security Act of 1974 and sought to eliminate conflicted retirement investment advice by placing certain restrictions on commission-based product recommendations.
After surviving multiple federal lawsuits, the regulation was vacated in its entirety in a 2-1 split decision in March 2018, ruling that the DOL overstepped its authority in the investment advice arena.