Enforcement of Regulation Best Interest, the industy’s sweeping new retail advice rule, is likely get tougher under a Joe Biden presidency, former Securities and Exchange Commission and Department of Labor attorneys predict.

A Joe Biden administratiom will get to name an SEC chairman to replace current Chairman Jay Clayton, who has already announced he wants to return to private practice in 2021. But Biden is unlikely to immediately replace Reg BI with a uniform fiduciary rule for brokers and advisors, which would take an act of Congress, attorneys said during an “Inside the Beltway: The Election Results Are In” webinar hosted by Faegre Drinker, a global law firm with a specialty in securities compliance and enforcement.

“We may see less aggression, although I do think that the Main Street investor approach will continue under a new chair appointed by President Trump,” Lundy added.

“I think what we will see if Vice President Joe Biden is elected is a more aggressive examination and enforcement approach using Reg BI as tool in the staff’s arsenal to enforce that new rule aggressively,” James Lundy, a Faegre Drinker partner and former senior attorney in the SEC’s Division of Enforcement and the Office of Compliance Inspections and Examinations.

“I assume at some point in the near future, that good faith compliance won’t be good enough. Literal compliance will be expected,” said Faegre Partner Fred Reish, who asked if Clayton’s focus on Main Street investors is “something that is embedded in the SEC now or malleable depending on who the chairman is?”

An enforcement tilt toward protecting investors is unlikely to change, no matter who is appointed, Lundy said. “For the industry, I don’t mean to be the bearer of negative news, but I think that focus on that priority is here for the foreseeable future. ... There are certain things that occur at the SEC that become embedded in culture. The industry should expect the Main Street focus to continue. ... Expect in a year or two Reg BI enforcement actions to be issued and the scrutiny in that area to continue regardless of who wins the White House or who they appoint to be SEC chairman,” Lundy said.

But a Biden administration is likely to empower current SEC staff and attorneys who may already want more aggressive enforcement and investor protection, Lundy said. “What happens is motivations change. There are people on staff who may have certain industry and political leanings and they tend to feel more emboldened under an SEC chair who aligns with their views, so you may see a cultural shift when a new chair who is appointed under new presidential regime,” Lundy added.

While Biden has said that he supports a uniform fiduciary rule that would blanket both broker-dealers and registered investment advisors alike, attorneys said that would take an act of Congress. And, the fact that Democrats lost seats in the House of Representatives and the Senate may retain its Republican majority depending on two Senate run-off elections in January in Georgia, makes a uniform rule less likely.

Nor is the new SEC chairman likely to seek to drastically modify or replace Reg BI anytime soon, Lundy said.

“I’ve been asked will a President Biden appoint a chairman who perhaps attempts to revisit Reg BI. My response to that is that at the commission I think that will be unlikely,” Lundy said. “At the commission, a significant amount of political capital was invested for that rule to get passed. It has detractors and supporters on both sides. It has withstood an appellate challenge at the Second Circuit this past June and I think it’s likely here to stay."

Broker-dealers are more likely to be impacted by who is in charge of the SEC and the Financial Industry Regulatory Authority (FINRA), Faegre Partner Sandra Dawn Grannum said.

“The election has less significance to broker-dealers than who is heading the SEC and Finra. Finra CEO Robert Cook has made no indication he’s leaving,” said Grannum, who noted that Finra is not a government agency but a self-regulator controlled by industry members.