In a letter to SEC Chair Jay Clayton in September, 35 House and Senate members urged the SEC to revise its proposed Regulation BI before it is finalized, asserting that the proposed rule "falls woefully short" in protecting retail investors. The letter claims that that the SEC has proposed Regulation BI pursuant to the rulemaking mandate under Section 913(f) of Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, but, in the view of the signatories, Section 913(g) contemplated a fiduciary standard. Moreover, the legislators argue that the SEC failed to adequately consider the results of its own study, which recommended that the SEC conduct rulemaking under Section 913(g). The letter goes on to note that while proposed Regulation BI sets out a standard that can be distinguished from the standard set forth in Section 913(g), the SEC fails to explain and define the proposed "best interest" standard clearly. The legislators are concerned that proposed Regulation BI relies heavily on disclosures to investors without any evidence suggesting that these disclosures would be effective. Finally, the legislators urge the SEC to adopt a more principles-based approach to prevent brokers from holding themselves out as investment advisers or acting in an advisory capacity. To read the letter, visit:

Originally published in REVERSEinquiries: Volume 1, Issue 7.

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