The Securities and Exchange Commission is under fire from the advisory community for its “Regulation Best Interest” rule designed to rein in broker-dealers.
Tentatively approved April 18, the rule is seen as a middle ground of sorts between full fiduciary status and the lighter suitability standard that brokers operate under now. In fact, some analysts termed the new regulation “suitability plus.”
The financial advisor community was hoping the SEC would raise the broker community to the full fiduciary standard. Many took out their frustrations in the first batch of comment letters the SEC posted to its website.
Fixed indexed annuities, in particular, require a true fiduciary regulation, wrote Maxwell A. Coulliette, president of One Financial Advisors in Salt Lake City.
“If ‘fixed equity index annuity’ products and the non-securities licensed agents who sell them are not regulated or held to the same standard as investment licensed agents, the effort to help the consumer will fall far short,” he wrote.
All of the first 10 comments posted so far are critical of Regulation Best Interest. Most of the commenters don’t identify themselves by profession.
“I would like to advise that to me and probably most people out in the Midwest would expect that best interest would be the equivalent of the fiduciary standard like a financial advisor,” said Charles K. Olsen. “This turns it into a very gray area, that I don’t think the average investor would realize that there would be a significant deviation from the standards of a financial advisor.”
SEC commissioners voted 4-1 to move the best-interest and two other rules forward for public comment. A second rule offers an investment advisor interpretation, while the third is a new general disclosure form.
A 90-day public comment and public hearing period will take place before the final rules are debated and possibly adopted.
“A law and standard need to be created to protect our citizens, and their future retirement goals,” wrote Michael Kulis in a comment. “While fixing Social Security may be a distant issue, let us not pass up a easy solution to the health of individual financial security.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org.
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