Time for SEC to Bring Some 'Real' Reg BI Enforcement Actions: Panel

FINRA has more enforcement cases related to Reg BI as the disciplinary actions “have been increasing,” Bill St. Louis, head of FINRA enforcement, said on April 22. “We have brought cases involving the Customer Relationship Summary form (Form CRS), excessive trading, complex products and variable annuities, with more in the pipeline,” St. Louis said.

Form CRS Is ‘Bad’

Jackson noted on the webinar that the agency also needs to make improvements to the customer relationship summary, known as Form CRS.

“After I stepped down from the SEC something happened, I got Form CRS,” Jackson said. “My financial advisor sent me Form CRS and I must tell you I opened it and was devastated to see how bad it is.”

Added Jackson: “There is muddled disclosure about the actual conflicts faced, there’s very little information about how the advisor is paid, and it [Form CRS] achieves almost nothing. That’s an extraordinary thing to say in light of the low standard that SEC disclosures have provided.”

In the next five years, Jackson said, the agency needs to not only work on making Form CRS “more useful for ordinary investors,” but also provide “detailed explanation about why risky products would ever be in retail investors’ best interest when Reg BI itself” says they rarely are.

Reg BI Is Not Enough

When asked during the webinar if Reg BI could provide sufficient investor protection if the Labor Department’s new fiduciary rule is torpedoed, the participants echoed a collective “no.”

Reg BI “only covers retail investors,” said Phyllis Borzi, former head of Labor’s Employee Benefits Security Administration, who moderated the panel discussion. ”And in the world of employer-sponsored retirement programs, advice to plan sponsors, plan fiduciaries, none of that is covered,” Borzi said. “The only agency that has the legal authority to cover that is the Department of Labor.”

The SEC’s jurisdiction, Borzi reminded attendees, “is limited to securities.”

The fact that Reg BI doesn’t cover plan sponsors, Peiffer said, means the SEC rules ”might cover when I go into my broker’s office and he gives me some advice … but if I go in as Joe Peiffer, founding partner of Peiffer Wolf Carr Kane Conway & Wise with 100 employees that we have to take care of and we have to devise a 401(k) plan for them to invest in, the advice that I get there is not covered by Reg BI, and would only be covered by the DOL rule.”