5 Rules the SEC Plans to Review This Year

The Securities and Exchange Commission plans to review five rules this year affecting registered investment advisors, according to the agency’s just-released “Reg Flex” agenda.

The agency is required to file its rule review under Section 610 of the Regulatory Flexibility Act.

While the SEC’s regulatory agenda “is robust” and “focused on measures that impose additional burdens upon issuers of securities,” according to Ron Rhoades, associate professor of finance at Western Kentucky University and director of its personal financial planning program, the agenda ignores “many of the problems confronting retail investors who face harm from conflicted investment advice.”

The SEC failed to tackle “major issues,” Rhoades said, including whether there exists any justification for continuing 12b-1 fees, “given their lack of benefit to fund shareholders,” and whether Regulation Best Interest “was founded upon a decade-old legal misinterpretation of case law” by the Financial Industry Regulatory Authority, Rhoades opined.

The agenda, according to Rhoades, also fails “to effectively address the incoherent and often misleading Form CRS requirements, which fail to adequately distinguish between the roles of brokers and that of fiduciary investment advisers.”

Amy Lynch, president and founder of FrontLine Compliance, said in another email to ThinkAdvisor that the list of proposed rules “is much shorter now as many previously proposed rules have moved to the finalization stage and few new proposed rules have been added.”

The two proposed rules Lynch sees “moving forward” are the Custody Rule for advisors and a proposal to rein in special-purpose acquisition companies.

“Both have been hot-button issues in the asset management space and the SEC wants to implement rule changes that reflect recent unofficial guidance,” Lynch said. “Some of the proposed rules that have come out recently are very controversial such as the private fund rule changes, ESG, and digital engagement practices.”

See the galley above for five rules the securities regulator has scheduled for review this year.