A bevy of trade groups led by the Financial Services Institute and SIFMA submitted a brief today asking a federal court to deny XY Planning Network’s lawsuit seeking to overturn Regulation Best Interest.

The brief follows on the heels of a similar request submitted by the Securities and Exchange Commission’s own general counsel, which said the high-profile network of financial planners and seven states (whose lawsuit against the SEC have been combined into a single suit) have no legal stake and would suffer no damages related to the rollout of Reg BI. 

The new brief, submitted by FSI, Sifma, the American Council of Life Insurers and the U.S. Chamber of Commerce, argues that the SEC is justified in creating the rule, which proposes that broker-dealers should follow a best-interest standard in lieu of a fiduciary duty akin to the one investment advisors must follow.

XYPN’s “real complaint with Regulation BI is their policy view that it did not go far enough, and that the SEC should have instead reflexively extended the fiduciary standard applicable to investment advisers to broker-dealers,” the trade groups wrote in their brief.

These policy objections to Regulation BI provide no basis for setting aside the regulation under the Administrative Procedure Act, as the SEC explains, the groups said.

Arguments against Reg BI also “unvaryingly overlook that imposing a one-size-fits-all fiduciary standard on broker-dealers would have reduced retail investor access to advice about securities ... and priced many investors out of the market for such advice.”

Many investors would be unable to pay for an ongoing fiduciary advisory model. And, investors with limited investment assets often do not qualify for advisory accounts because they do not meet account minimums, the trade groups said.

“If a firm has a $50,000 minimum, more than 57% of account-holders would be unable to open fee-based accounts. And if a firm has a $75,000 minimum, two-thirds of account-holders would be left without any professional investment advice,” the trade groups said.

If the costs and burdens associated with maintaining commission-based accounts become too high for broker-dealers (as they would under the investment advisor fiduciary standard), many retail investors would simply lose access to investment advice, the groups said.

“These harms to investors, as the SEC explained, ‘are not theoretical,'" the trade groups continued.

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