July 30, 2019

CNBC Quotes Jim Lundy and Fred Reish on New SEC Investor Protection Rule

Next June, the Securities and Exchange Commission’s Regulation Best Interest (“Regulation BI”) rules will go into effect, with CNBC reporting that advisors will be compelled “to put clients’ interests first when giving investment advice.” They will also have to disclose conflicts of interest, and broker-dealers will be tasked with mitigating, and in some cases eliminating, those conflicts among the 630,000 brokers they employ.

In their article “SEC’s New Investor Protection Rule Won’t End the Fiduciary Debate,” the news organization quoted Drinker Biddle partners Jim Lundy and Fred Reish on anticipated impact.

CNBC notes that, even after implementation of Regulation BI, there will continue to be different ethical standards that apply to different advisors, depending on how they are regulated, their business model, and their specific relationship with a client.

“Broker-dealers and registered investment advisory firms historically have not had a uniform standard of conduct, and that has not changed,” Lundy told CNBC.

The Department of Labor has also been working on a revised fiduciary rule, after its initial version was struck down in a 2018 court challenge. The agency has indicated it will release a new version of the rule later this year, but industry experts are uncertain if it will align closely with the SEC’s Regulation BI.

Adding to the unpredictability is Labor Secretary Alexander Acosta’s recent resignation and President Donald Trump’s nomination of Eugene Scalia to replace him.

Reish told CNBC that “everything is up in the air at DOL now because of the resignation of Acosta and the nomination of Scalia. No one really knows what approach Scalia would take.”

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