The broker-dealer industry is blanketing the House with a letter asking members to oppose an amendment that would prohibit the SEC from funding implementation of its new standard of conduct rules for brokers and advisors.

The amendment, introduced by House Financial Services Committee Chairwoman Maxine Waters, D-Calif., on Tuesday, would prohibit the Securities and Exchange Commission from “implementing, administering, enforcing or publicizing the final rules and interpretations” of its controversial "best-interest" conduct rules, which the SEC approved on June 5. Waters said the rule fails consumers because it does not hold brokers to the same fiduciary standard as registered investment advisors. 

Waters' amendment stands little chance of passage in the Republican-led Senate. But that doesn’t mean Wall Street, the broker-dealer industry and its association SIFMA are taking any chances, sending a letter to every House member asking them to oppose the rule.

“It makes no sense to halt the orderly implementation of this important new set of regulations that would provide strong investor and consumer protections for forty-three million households,” SIFMA President and CEO Kenneth E. Bentsen Jr. said in statement.

The rule “materially and unalterably” raises brokers’ regulation and “is the most comprehensive enhancement of standard of conduct rules governing broker-dealers since the enactment of the Securities Exchange Act of 1934,” Bentsen said.

SIFMA argued in its letter that “the new Reg BI standard is both equivalent to and, in certain provisions, exceeds what is required by the Investment Advisers Act of 1940.”

Even if Waters’ amendment were to be approved, brokers would still be required to implement Reg BI, but with the ominous proviso that Finra would become the Reg BI enforcer for broker-dealers, SIFMA noted.

In such a case, consumers could continue to bring claims asserting violation of provisions under Reg BI through Finra arbitration. “However, regulated firms would not be provided the benefit of guidance from the SEC, nor would the SEC be able to bring enforcement actions pursuant to Reg BI,” the association said.  

The Waters amendment would also prevent the SEC from educating consumers about the new protections the SEC rules would provide, SIFMA concluded.