The “SEC consciously considered and rejected imposing full fiduciary duties on broker-dealers in the enactment of Reg BI. Thus, to the extent the Division of Enforcement attempts to convert Reg BI into a quasi-fiduciary duty standard in the actions it brings, it may be helpful to point to the extensive consideration of precisely that question during the notice and comment period,” he said.
The lack of precedent interpreting Reg BI’s new best interest standard may also create a double-edged sword for the SEC, Wolfe warned.
“On one hand, the SEC and its Exams and Enforcement Divisions have significant discretion to expansively interpret the scope of Reg BI. On the other hand, broker-dealers can also employ a broad range of arguments and strategies in defense of any overly broad or aggressive enforcement action,” he added.