Investor Protection

Amicus Brief Filed by CFA and Better Markets in Support of Legal Challenges to Regulation “Best Interest”

Washington, D.C. – In July 2019, the Securities and Exchange Commission (SEC) issued Regulation Best Interest (Reg. BI). Shortly thereafter, two legal challenges, one by XY Planning Network and Ford Financial Solutions, and the other by seven states and the District of Columbia, were filed against the SEC. These challenges claim that Reg. BI is contrary to law and arbitrary and capricious. CFA and Better Markets filed this amicus (friend of the court) brief with the Second Circuit Court of Appeals supporting the petitioners’ arguments and urging the court to vacate (set aside) the rule.

In short, CFA and Better Markets’ brief highlights how Reg. BI was divorced from any reasonable assessment of the facts and the law. Specifically, it showcases how the SEC refused to follow the text and purposes of Section 913 of the Dodd-Frank Act, which set forth the framework for establishing a uniform fiduciary duty for broker-dealers’ and investment advisers’ personalized investment advice to retail investors, the SEC failed in Reg. BI to achieve even its own modest objective of “enhancing investor protection,” and the SEC blindly accepted the broker-dealer industry’s self-serving arguments as justification for issuing Reg. BI.

Reg. BI was, according to CFA and Better Markets, first and foremost a regulatory action designed to preserve and protect the broker-dealer industry, not vulnerable investors. It appears by all accounts that Reg. BI’s “best interest” standard is designed to operate as a slogan, not a meaningful and enforceable standard designed to ensure investors are protected from the harms that result from brokerage conflicts of interest. For these reasons, CFA urged the court to vacate the rule.