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October 9, 2019

Financial Times Quotes Reish on Outlook for SEC Broker Regulation

Drinker Biddle partner Fred Reish spoke with international news outlet the Financial Times about new rules from the U.S. Securities and Exchange Commission regarding the advice savers receive about their investments. Approved in June, the publication reports that the SEC intends to “strengthen consumer protection without imposing onerous costs on practitioners.”

In the article, “SEC’s Reforms Spark Debate Over ‘Ugly’ IRA Rollovers,” the Financial Times discusses the debate over whether the measures offer sufficient protection to investors deciding whether to transfer retirement funds into other accounts.

Last year, nearly 19 million Americans transferred money from employer-sponsored retirement plans into individual retirement accounts managed by a broker, which can mean higher costs and commissions.

The new SEC rules mandate brokers to put their clients’ interest before their own, a higher standard than before. Brokers now need to have a “reasonable basis” to believe the IRA rollover is in the customer’s best interest “at the time of the recommendation”.

Reish said that “advisers almost universally recommend participants take their money out of plans” and roll them over because they are paid for investments placed in the IRAs.

The SEC’s approach to enforcement of the new rules will be key, Reish told the publication.

“That’s because the rules are principles-based and vague, meaning that the key is how the SEC enforces them,” he said. “If the SEC has a ‘light touch’ approach to enforcement, the new rules for rollovers won’t make much of a difference.”

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