House Financial Services Committee Chairwoman Maxine Waters (D-CA) has wasted no time in asking President-elect Joe Biden to rescind the Securities and Exchange Commission’s broker advice rule and other new agency regulations she says imperil investors.
In a massive 31-page letter delivered to Biden on Friday, Waters asked Biden to rescind the SEC’s Regulation Best Interest and the new Customer Relationship Summary disclosure requirements (Form CRS)—both went into effect June 30. She also wants do undo the SEC’s new accredited investor, unregulated “Finders” and proxy voting rules.
“Trump’s Securities and Exchange Commission has taken several actions that have eroded shareholder rights, established regulatory barriers to shareholder engagement, increased issuer involvement in the proxy voting advice process and stripped away fundamental investor protections, including safeguards around private markets, where investors have few protections,” Waters wrote.
Waters has long criticized the SEC for failing to use Reg BI as a vehicle to create a uniform fiduciary standard for broker-dealers and their investment advisor representatives, who she said are still able to use a less rigorous advice standard than registered investment advisors when working with retail investors.
Waters joined 11 other current and former lawmakers in January to support state attorneys general and XY Planning Network’s petition to vacate Reg BI, but the Second U.S. Circuit Court of Appeals found Reg BI does not violate Dodd-Frank Wall Street Reform and Consumer Protection Act regulations passed in the aftermath of the 2008-2009 financial crisis.
In her letter to Biden, Waters also mentioned that for the first time in years the SEC’s enforcement actions decreased during the commission’s 2020 fiscal year.
“While the pandemic may be partially to blame for the decrease, the SEC’s relaxed approach to enforcement resulted in the Commission issuing no-action relief that temporarily exempts financial firms from enforcement action for non-compliance with the Customer Protection Rule, putting retail customers’ funds and securities at risk,” according to Waters.
Consumer advocates are delighted with the prospect of greater investor protection. “We expect the SEC to make it an early priority to fix Reg BI,” Barbara Roper, director of investor protection at the Consumer Federation of America, said in an interview.
“There are things they can do relatively quickly like provide more guidance on the meaning of best interest and how they will measure whether policies and procedures to mitigate conflicts of interest are adequate,” she added.
In the meantime, she noted, investors can protect themselves by choosing advisors who voluntarily adhere to a high fiduciary standard and structure their business models in ways that minimize conflicts.
Waters also asked Biden to rescind the SEC’s new rule expanding the definition of accredited investor, and to roll back efforts to provide retail customers with more access to private equity.
In addition, Waters wants the Biden administration to reverse or rescind the SEC’s recent rule changes to allow unregistered “finders” to receive transaction-based compensation for successfully marketing private equity opportunities to accredited investors at broker-dealers.
Furthermore, she asked Biden to rescind the SEC’s spate of shareholder proxy rights rules, which she said make it “more difficult for shareholders to resubmit shareholder proposals, which will disparately impact proposals on issues such as climate change, diversity and other environmental, social and corporate governance (ESG) issues,” Waters wrote.
Finally, Waters also pressed Biden to rescind the SEC’s whistleblower program rules which she said gives the SEC “discretion to reduce awards to whistleblowers and includes problematic interpretive guidance regarding what would constitute original information.”