June 2019 Ed

The SEC is the right agency for the right Best Interest rule

Jun 4, 2019

If it seems like almost a decade since the Dodd-Frank Wall Street Reform and Consumer Protection Act asked the U.S. Securities and Exchange Commission to revise its standards of care and the Department of Labor’s attempt at a fiduciary rule — that’s because it has been.

As part of the biggest overhaul of U.S. financial regulations, lawmakers in 2010 gave the SEC authority to write a fiduciary rule. They wanted investment advice to be free of conflict.

At the same time the DOL tackled the issue through the Employee Retirement Income Security Act (ERISA). Their fiduciary rule would have placed strict new requirements on those offering advice in retirement savings accounts. 

The rule was complicated for providers and confusing to customers. It created a potential for broker-dealers, registered investment advisers and bank trust departments to each be subject to different standards of care.

In 2018, the DOL fiduciary rule was vacated by federal courts.

Now, these years later, there comes an opportunity for the SEC to vote on regulations that would raise the standard for financial professionals who work with retail investors, including retirement savers.

This rule, expected to be voted on June 5, shouldn’t be viewed as the final deal on the topic, but as the beginning of a broader discussion. And we believe it’s a good one.

We have more than 9 million working Americans who have said to us, “We trust you.” We take that seriously. It’s why we support the SEC’s Regulation Best Interest rule. The SEC’s rule ramps up the standard of care from “suitability” to “best interest” for customers so they understand the risks and rewards of a recommendation and any conflict of interest would be disclosed.

Isn’t that what lawmakers had in mind when they approved Dodd-Frank?

DOL Secretary Alexander Acosta said recently that he wants the DOL to revive the fiduciary rule talks. It should. But it should follow the SEC’s lead and apply the rule to all securities transactions or strategies recommended to retail customers.

We believe the SEC is the correct agency for setting this bar and these standards. The SEC regulation would apply to all securities transactions, including those also subject to ERISA.

This is important. As we move toward a time in which each individual in our country is responsible for funding their own retirement, we are seeing a movement to full integration of retirement saving with overall financial planning. The SEC rule would help us move in that direction as it synchronizes consumer expectations and compliance protocols for all investor types.

So with the SEC’s mandate under Dodd-Frank and its comprehensive knowledge and understanding of investment markets, we say, it’s time to move toward the promise of enhancing and clarifying what it means to act in the best interest of retail customers.

The Regulation Best Interest rule says we would cut out the jargon — something retirement savers have told us in recent surveys was important to them. It also says we would be clear on costs. We would let investors understand the motivations of their advisors without limiting their options. And we would improve on the promise of eliminating conflicts of interest and getting savers the information they need, with options that are in their best interest. 

It’s been almost a decade. It’s time.

Securities offered by GWFS Equities, Inc., Member FINRA/SIPC, marketed under the Empower brand. GWFS is affiliated with Great-West Funds, Inc.; Great-West Trust Company, LLC; and registered investment advisers Advised Assets Group, LLC and Great-West Capital Management, LLC, marketed under the Great-West Investments™ brand. This material has been prepared for informational and educational purposes only and is not intended to provide investment, legal or tax advice.


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