The SEC’s alleged “drive-by regulation without rules” has to stop, according to the Financial Services Institute, which today launched a lobbying initiative that includes a website, an animated video and plans to have hundreds of its independent advisor members lobby lawmakers.
“We have long worked on this issue, and today took another step forward in calling attention to the SEC’s moving the goal posts on firms who are complying with the regulations on the books,” FSI Senior Vice President Christopher J. Paulitz said in a statement to members announcing the campaign.
The SEC’s recent “Share Class Selection Initiative,” which was launched last year and collected $125 million from almost 80 investment advisors, is a prime example of the SEC’s “regulation without rules,” the FSI said on its new website.
The enforcement staff “could not cite a clear rule or regulation that had been violated. Instead, the SEC relied on previous settlements and past published guidance (which are statements of the staff’s view on a topic at a given time) to squeeze settlements from businesses today,” said the trade group, which represents the independent broker-dealer industry and has 30,000 members.
Saying the threat of new enforcement actions hanging in the balance, FSI is asking its members to reach out to their congressional representatives, particularly during the group's annual Washington, D.C., conference in September, and has adopted the hashtag #RegsWithoutRules to promote the campaign.
“We have worked hard for years to develop a productive and constructive working relationship with the SEC,” David Bellaire, FSI executive vice president and general counsel said in an email. “But there is no rational justification for moving the goalposts on firms that diligently complied with the rules on the books."
SEC spokesman Christopher Carofine said the agency declined to comment on the FSI initiative.
The trade group is asking SEC commissioners to “instruct the enforcement division to stay further enforcement actions under the current share class disclosure initiative, and not expand it further, until appropriate rules addressing the commission’s concerns have been adopted.”
Any rulemaking should be transparent, allow interested members of the public to provide comment and include an appropriate phase-in period to allow firms to develop and implement plans to comply with the new rules, with consideration given to grandfathering established practices, FSI said.
“Regulating without rules creates uncertainty because it does not give notice to firms of how they should operate their businesses, leads to inconsistencies in interpretation and enforcement, and increases costs for investors,” FSI said.