September 16, 2019

RIABiz Looks to Jim Lundy for Insight into Lawsuit against SEC’s Reg BI

Industry publication RIABiz spoke with Drinker Biddle partner Jim Lundy about the XY Planning Network and Ford Financial Solutions lawsuit against the SEC, which aims to overturn Reg BI.

The lawsuit, which comes on the heels of a separate suit filed on September 9 by seven states and the District of Columbia that also seeks to overturn the measure, claims the agency evaded the Dodd-Frank Act when crafting its broker conduct rulemaking package.

With the states and two firms taking action, Lundy noted that “Challenges to SEC rulemakings, historically, have been led by industry groups." RIABiz also discussed FINRA’s suitability rule with Lundy, but he remarked this this rule does not delve into conflicts of interest and disclosures. Reg BI does address these, Lundy noted, and is therefore an improvement, despite these legal challenges.   

“I think an objectively fair read is the SEC sought to make improvements on regulatory standards. It includes an obligation to disclose conflicts. But it stops short of a uniform fiduciary standard,” said Lundy.

He added that the states' legal challenge could lead down a long path, delving into complex legal issues involving states’ rights versus federal rights.

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