January 11, 2019

Jim Lundy Interviewed by AdvisorNews Regarding the SEC’s Reg BI Proposals

Chicago partner Jim Lundy was quoted in an AdvisorNews article titled “Government Shutdown Could Delay Reg BI Rollout.”

The government shutdown’s impact continues, and it seems likely that the timetable for the finalization of the SEC’s Regulation Best Interest (Reg BI) proposals will be delayed. Jim commented on this and certain factors influencing finalization, FINRA’s possible response, and what Reg BI may look like in final form.

While some industry sources have speculated that the final rules could have been released as early as the first quarter of 2019, Jim noted that nobody knows exactly when to expect final rules, though he does think that “it will occur before the end of this fiscal year.” He acknowledged the impact of the shutdown on the final releases, saying that “[a]ll of the staff, across all of the divisions have essentially been furloughed. So, no work at the staff level is being done in all likelihood, so that has cost them.”

Jim also noted that while Elad Roisman, who was sworn in as SEC Commissioner in September 2018, and his staff were working diligently, this recent addition to the Commission “may impact the timing, affording Commissioner Roisman time to get up to speed.”

The proposed standard may also influence other regulatory bodies’ approach to best interest standards, and Jim believes that FINRA is likely to take a more customized approach: “FINRA typically likes to have a rule book that has rules applicable to its member firms. So, I think, in all likelihood, that they will try and tailor some sort of rule that is consistent with Reg BI and whatever that looks like.”

Regarding the controversial nature of the proposals, Jim posited that, “[t]here is a convergence of the standards. I think both sides–industry and investor–are unsure of what that convergence means,” and “I think the industry thinks it is converging too much and the investor side thinks it is not enough. Maybe that means it is the right landing point.”

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