“The letter was very, very critical and was basically saying, ‘You’re catering to the brokerage industry and giving them free rein to provide conflicted advice if they disclose,’” said Michael B. Koffler, a partner with Eversheds Sutherland.

“Instead of asking for tweaking, NASAA said: ‘Hey SEC, you’re missing the boat,’” Koffler said.

If timing is everything, it’s worth noting that the NASAA briefing comes one week before what promises to be a contentious first congressional hearing into the SEC’s proposal. Entitled “Putting Investors First? Examining the SEC’s Best Interest Rule,” the hearing will be held March 14 by the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets.

The hearing will offer Maxine Waters (D., Calif.) her first chance as chair of the House Financial Services Committee to question SEC Chairman Clayton about the agency’s Regulation Best Interest since she assumed the gavel in January. She has criticized the SEC and Clayton in the past for not creating a fiduciary standard of conduct for brokers.

“Waters has already made clear that this will be a grilling for Chairman Jay Clayton over what Reg BI will and won’t do,” Koffler said.

While “there is not an avenue for lawmakers to directly get involved with the rulemaking, they could form a resolution denouncing it, but can’t impact timing,” he added.

“We won’t see [the hearing] slowing up rulemaking, but the real question is whether that grilling, combined with the recent letter from NASAA and proposals from states, will cause the SEC to come back and say there are certain conflicts that can’t be disclosed,” Koffler said.

NASAA’s letter to the SEC criticizing its rule “has a lot more force, a lot more energy” than congressional hearings, he added.

The fact that the SEC proposal is being viewed as more of a cosmetic fix “is why you see states like Nevada and Maryland proceeding with their own proposals,” Koffler added.

Rules in both states are proceeding quickly, and if passed would give brokers, salespeople and dually registered advisors almost no exemptive wiggle room from taking on full fiduciary responsibilities if they work with investors in these states and try to call themselves advisors, attorneys say.