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October 20, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

NY and CT join lawsuit against SEC’s investor protection rule

New York Attorney General Letitia James is leading a coalition of eight attorneys general, including her Connecticut counterpart William Tong, in a federal lawsuit against the U.S. Securities and Exchange Commission’s Regulation Best Interest policy, arguing that it fails to cover investor protections.

In 2010, the Dodd-Frank Act gave the SEC the authority to create a standard of conduct for broker-dealers and investment advisers. In June, the SEC adopted Regulation Best Interest by a 3-1 vote, with the commission’s lone Democrat as the dissenter.

The SEC stated the regulation, which is to go into effect in June 2020, is designed to improve the quality and transparency of investors’ relationships with investment advisers and broker-dealers. However, the attorneys general argued that the regulation failed to elevate broker-dealer standards beyond their existing suitability requirements and would likely create ongoing confusion on how it defined the “best interest standard.”

“With this rule, the SEC is choosing Wall Street over Main Street,” James said. “Instead of adopting the investor protections of Dodd-Frank, this watered-down rule puts brokers first. The SEC is now promulgating a rule that fails to address the confusion felt by consumers and fails to remedy the conflicting advice that motivated Congress to act in the first place. Despite the SEC’s refusal to do its job, New York will continue to lead the charge to protect the millions of individuals investing in their futures, including the millions of Americans saving for retirement.”

“The SEC has ignored Congressional intent and broken faith with American families — violating the law with its weak and insufficient ‘Regulation Best Interest,’” Tong said. “Congress passed Dodd-Frank to ensure that brokers were providing advice and guidance that were in the best interest of their clients, rather than furthering the brokers’ own personal interests. We aren’t talking about millionaires and billionaires here, we are talking about families saving for retirement and planning for their future. They must be protected from those who would take advantage of an honest need for guidance and assistance.”

Joining James and Tong in the lawsuit are the attorneys general of California, Delaware, Maine, New Mexico, Oregon and the District of Columbia.