Maine joins suit to stop new securities regulation
Courtesy / NYSE
Maine's attorney general has joined a lawsuit alleging new requirements of stock brokers don't go far enough and violate the intent of Congress.
Maine has joined a coalition of six other states and the District of Columbia suing to stop a new securities regulation they say fails to provide “basic investor protections.”
Maine Attorney General Aaron M. Frey signed on as a plaintiff in a federal suit alleging the Securities and Exchange Commission’s “Regulation Best Interest” ignores the direction of the U.S. Congress, making the rule unlawful, according to a news release from his office Tuesday.
Regulation Best Interest ups the obligations of securities brokers when recommending investments to customers. But it does not require brokers to provide investment counsel without regard to their own interests — as investment advisors are required.
Frey and the other AGs say the SEC's failure to impose the same fiduciary duty on brokers deliberately violates the intent of Congress in passing the 2010 Dodd-Frank Act.
“Important fiduciary regulations were adopted as a result of the Dodd-Frank Act, which passed in partial response to the abuses which created the financial crisis,” Frey said in the release. “Those regulations provided necessary protections for investors by creating uniform standards which ensured that all financial professionals had a fiduciary duty to their clients. Regulation Best Interest would weaken those important protections.”
The SEC adopted Regulation Best Interest in June in an effort to make the work of registered broker-dealers more transparent. Under the rule, scheduled to take effect next year, “broker-dealers will be required to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy,” the commission said in a news release.
That’s a tougher standard than current regs, which merely require brokers to provide advice that is “suitable” for the goals of their clients, but not necessarily the best choice or the one with the lowest fees.
The AGs say that’s not enough.
“The SEC’s own professional staff recommended that the SEC adopt the uniform fiduciary standard articulated in the Dodd-Frank Act, but the regulation expressly rejects imposing a fiduciary standard on broker-dealers and, instead, allows them to consider their own interests when making recommendations,” Frey’s release said.
Frey joins the AGs of New York, California, Connecticut, Delaware, New Mexico, Oregon, and the District of Columbia in the suit. It’s been filed in both the Southern District of New York and the U.S. Court of Appeals for the Second Circuit, which has jurisdiction over securities rules.
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