February 21, 2021

ThinkAdvisor Shares Insight From Faegre Drinker Partners on the Current DOL and SEC Regulatory Environment

In the article, “What’s on Gary Gensler’s To-Do List?” ThinkAdvisor reported on the tasks incoming Securities and Exchange Commission (SEC) Chairman Gary Gensler is expected to take on once he’s confirmed by the Senate. The article highlighted Faegre Drinker’s Feb. 16 “What Lies Ahead for RIAs: The DOL and SEC Regulatory Landscape” webinar, which included commentary from business litigation partners Jim Lundy and Sandra Grannum about Gensler’s priorities and also Brad Campbell’s takeaways on the Department of Labor (DOL)’s new fiduciary exemption rule going into effect.

Lundy said that, particularly in the near term of Gensler’s tenure, the SEC “will enforce Reg BI. It’s a tool kit in enforcement’s arsenal … a disclosure-based rule that they can examine for and enforce. And it also is a rule that has a compliance obligation attached to it, which has essentially a failure to supervise component embedded in there.”

Grannum agreed, adding “The question just becomes the level of enforcement of the rule and the scrutiny and how it will be interpreted. It is a principle-based reg; it’s not rule-based, so there will be a lot of interpretations as to … what will be sufficient to satisfy the rule.”

Campbell emphasized that “there’s things to be put into place that in all likelihood have not been put into place by your RIA or your broker-dealer because no one actually thought this exemption was going to go into effect today.”

Campbell expanded on what the new rule means for financial institutions, saying “Before you can use the new exemption, your financial institution — RIA or broker-dealer — is going to have to provide new policies/procedures, take new steps, provide training, go through that whole process. That’s in part why DOL allowed the current non-enforcement policy to persist until December, so there’s time for folks to make that transition.”

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