The North American Securities Administrators Association is escalating its call for tougher broker sales regulation, scheduling a Capitol Hill briefing for lawmakers, regulators and the media on March 5.
The legislative agenda rollout will take place in the Rayburn House Office Building beginning at 1:30 p.m., and follows closely on the heels of a letter NASAA sent to the Securities and Exchange Commission on February 18 telling the agency its proposed Regulation Best Interest sales standards do not go far enough to protect consumers.
Regulation Best Interest is a key part of a proposed investment advice reform package the SEC expects to finalize this summer.
Although the proposed regulation requires brokers to act in the best interests of clients, state regulators said the brokerage industry is interpreting it to mean brokers can provide conflicted investment advice as long as they disclose the conflicts. Such conflicts are costing investors some $17 billion in unnecessary commissions and fees annually, according to the White House Council of Economic Advisers.
NASAA is contending that brokerage and insurance industry trade groups’ support of the SEC proposal is proof the rule won’t adequately protect investors. Such associations include the Financial Services Institute, SIFMA and the American Council of Life Insurers, whose members manufacture and/or sell products with commissions. These same groups successfully defeated U.S. Department of Labor fiduciary standards in court last year.
“To these industry groups, no abusive product or practice appears to be off limits,” NASAA president Michael Pieciak said in his letter to SEC Chairman Jay Clayton.
“These groups point to the commission’s ‘interpretive nuances’ as confirmation that pretty much anything and everything will be considered ‘acting in the client’s best interest’—where disclosure occurs,” Pieciak said.
NASAA said the SEC should ensure that the final regulation address the most egregious kinds of broker conduct, including engaging sales contests, receiving revenue-sharing payments and selling a limited number of high-cost products.
Going Viral
The NASAA letter has gone viral, at least among legal, regulatory and industry circles.