SEC Chairman Discusses Commitment to Regulation BI in House Committee Meeting
The House Financial Services Committee held an online hearing with Securities and Exchange Commission Chairman Gary Gensler on Tuesday where he discussed the future of Regulation Best Interest, the SEC's broker advice rule.
The House Financial Services Committee held an online hearing with Securities and Exchange Commission Chairman Gary Gensler on Tuesday where he discussed his commitment to Regulation Best Interest, the SEC’s broker advice rule.
Rep. Ann Wagner (R-MO) asked Gensler about his commitment to the continued implementation of the regulation following his recent appointment of Barbara Roper to senior advisor, who is tasked with focusing on issues relating to retail investor protection, such as broker-dealer oversight, investment adviser oversight, and examinations. Roper, the director of investor protection for the Consumer Federation of America, has been an outspoken critic of Regulation Best Interest, which she has called “vague and undefined.”
Without mentioning Roper by name, Rep. Wagner said, “You have brought on staff with a clear public record of opposing Reg BI. You can understand how that would give the investing public the impression that the SEC under your leadership is not committed to Reg BI. And I’d like to point out that during your confirmation process, you committed to working with Commission staff to ensure Reg BI, and I quote ‘lives up to its best interest label.'”
“I think that is as true today as when I said it,” Gensler replied. “To ensure that our regulations –
Regulation Best Interest and others – live up to what’s in, written down on the page, and really is regulation best interest, in that investors are getting the best interest when a broker is making recommendations.”
Later during the hearing, Rep. Carolyn Maloney (D-NY) asked Gensler if the SEC plans to “take further action to strengthen” the regulation.
“I think that it’s important that this rule lives up to its potential – that best interest really does mean best interest,” said Gensler.
Gensler explained that he plans to work with the SEC’s examination staff and the division of corporate finance, as well as Roper, “to ensure that the retail public gets the best.” He did not mention Roper by name, but referred to her as “an excellent person who is a senior advisor to me directly.”
“I’m also asking the staff to consider how do we ensure that the brokers and the investment managers understand their duties under that rule and to ensure that…best interest means best interest,” Gensler added.
Earlier this year, Roper commented on Twitter that “Reg BI’s chief weakness – that key terms like ‘best interest’ and mitigation of conflicts are undefined – could now be its chief strength, if new leaders at the agency interpret and enforce these requirements to the benefit of investors, as we expect they will.”
Regulation Best Interest was adopted by the SEC in June 2019 as part of a package of rules and interpretations designed to address the obligations of broker-dealers and investment advisers when they provide recommendations or investment advice to retail investors.
