BALTIMORE — The Securities and Exchange Commission has been very deliberate with its Regulation Best Interest, which was tentatively adopted last April.
Since then, not a lot has happened as the SEC collects comments and tinkers with the rule behind closed doors. But there may be a method to their madness, said Carl Wilkerson, vice president and chief counsel, securities, for the American Council of Life Insurers.
Wilkerson moderated a panel discussion on best-interest regulation in “a post-DOL Rule world.” The Department of Labor fiduciary rule was tossed out one year ago by a federal appeals court.
Since then, several states have gone ahead with their own efforts to further regulate the sales of insurance products. Many of those rule proposals are wildly different. That worries the industry.
But SEC regulators are engaged with their state counterparts like never before, Wilkerson said, calling it unprecedented coordination. The hope is that the SEC will provide a “platform” for a best-interest rule that is as uniform as possible across the country.
“We’re hoping they can get it done as soon as possible,” Wilkerson said, adding that SEC regulators are known for being very thorough and studiously considering every comment.
During an earlier session on regulation, Bruce Ferguson, senior vice president, state relations, ACLI, pegged September 2019 as the likely time for the final SEC Reg BI.
Meanwhile, the National Association of Insurance Commissioners is trying to put a annuity sales model law together to guide states. If they can produce something in harmony with the SEC, the industry will likely be very pleased, panelists said.
“While we might get a good outcome at the NAIC, what comes next is implementation at the state level,” Ferguson said. “Our job will be to make sure it is uniformly and operationally adopted by the states.”
The alternative is more rules like those seen in Maryland and New York, panelists agreed. The New York best-interest rule is complete and takes effect in August for annuities and six months later for life insurance.
“It all adds up to a fiduciary standard,” Ferguson said. “That was probably the most aggressive play we’ve seen by any state so far.”
But Maryland also drew the ire of panelists.
State Sen. Jim Rosapepe introduced the Financial Consumer Protection Act of 2019 in Maryland, establishing that certain professionals are fiduciaries, including broker/dealers, broker/dealer agents, insurance producers, investment advisors, federally covered advisors and investment advisor representatives.
Under the legislation, fiduciaries are required to act in the best interest of their clients, without regard to financial or other interests of the person or firm providing the advice. Critics say it will limit advice to only those who can afford it.
“It’s very, very sweeping and very, very broad,” Ferguson said. “We will begin to see multiple states take up this issue. Hopefully, most of them follow the NAIC model.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at email@example.com. Follow him on Twitter @INNJohnH.
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