Home News XY Planning Network Files Lawsuit to Challenge SEC’s Regulation Best Interest Rule

XY Planning Network Files Lawsuit to Challenge SEC’s Regulation Best Interest Rule

XY Planning Network (XYPN), a financial planning platform for fee-only financial advisors founded by Alan Moore and Michael Kitces, has filed a lawsuit in the Southern District of New York to challenge the Securities and Exchange Commission’s broker advice rule, Regulation Best Interest, on that grounds that it creates a competitive disadvantage for registered investment advisors who are held to a fiduciary standard.

XY Planning Network (XYPN), a financial planning platform for fee-only financial advisors founded by Alan Moore and Michael Kitces, has filed a lawsuit in the Southern District of New York to challenge the Securities and Exchange Commission’s broker advice rule, Regulation Best Interest, on that grounds that it creates a competitive disadvantage for registered investment advisors.

The news follows yesterday’s announcement that eight attorneys general are also suing the SEC to vacate the rule for failing “to meet basic investor protections laid out in the 2010 Dodd-Frank Act,” which requires financial advisors to adhere to a fiduciary standard if they are compensated for financial planning.

XY Planning claims the SEC’s rule ignores Congress’ requirement to delineate between brokerage sales and investment advice. Registered investment advisers have traditionally been held a fiduciary standard, while brokers-dealers are held to the less stringent suitability standard.

The SEC adopted Regulation Best Interest in June, which claims to go beyond the current 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. Under the regulation, brokers will be required to provide customers with a document that discloses the types of services offered, the legal standards of conduct, applicable fees, and conflicts of interest that may exist.

XY Planning said in its complaint that “the line between advisers and broker-dealers had blurred, with an increasing number of broker-dealers performing many of the same services as investment advisers, without having to satisfy the same regulatory requirements in doing so.”

“When a consumer hires a financial planner, they expect that the advice they receive will be in their best interests at all times, which is the very essence of a fiduciary rule and the definition of ‘advice’ itself,” said Moore. “By allowing brokers to hold out as financial planners and provide financial planning advice upfront, and then switch to non-advisory services selling brokerage products during the implementation phase, the SEC amplifies the very consumer confusion they claimed they were seeking to fix with Regulation Best Interest.”

The compliance date for both Regulation Best Interest (Regulation BI) and Form CRS is June 30, 2020.

XY Planning Network is an organization of more than 1,000 financial planners working under RIAs that provide financial-planning services on a fee-for-service basis, primarily to Generation X and Generation Y consumers.

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