My schedule – and aversion to crowds – means that I rarely see a new movie the first weekend it comes out (a rare exception – Avengers: Infinity War this weekend).
While this means that there are times when I’m the only one in the office the following Monday who hasn’t
seen the latest blockbuster (and thus can’t offer an opinion), more
often than not, it’s also spared me the time, money (and potential
aggravation) of rushing out to see a movie that is more likely to be up
for a “Razzie” than an Oscar.
However, I’ve also found myself in situations where the hype
surrounding a new blockbuster is so compelling that it builds up my
expectations beyond the reality – leaving me… underwhelmed.
Doubtless that was the sense of many in reading the Best Interest Regulation proposal
published by the Securities and Exchange Commission last week. Those
who had hoped that a uniform fiduciary standard might emerge were surely
disappointed, as were those who might have anticipated that the SEC’s
proposal might step up and fill a gap potentially created if the 5th Circuit’s ruling
was unchallenged. There is, of course, an irony in a Regulation Best
Interest that doesn’t define “best interest,” and understandable
concerns that a standard that leans so heavily on “reasonable” tests is
portrayed as an objective standard.
On the other hand, all will surely find comfort in the
acknowledgement that “cheapest” isn’t deemed equivalent with “best,” and
some will certainly be reassured by the “principles-based” emphasis,
not to mention the acknowledgement of the Labor Department’s fiduciary
rule and Best Interest Contract Exemption (BICE) and the latter’s stated
objectives as consistent with Regulation Best Interest, even if the
latter doesn’t create fiduciary status.
Odds are, if you liked the Labor Department’s fiduciary rule and its
structures, you won’t be satisfied with the SEC’s take. On the other
hand, if you thought the DOL went too far, the SEC’s proposal might well
be more in line with your expectations. And yet, the lingering
uncertainty as to the when – or if – of the SEC’s response –
and the (at last until lately, relative) certainty of the Labor
Department’s approach has led many firms to institute processes and
procedures suited for the latter, not the possibility of the former.
Arguably, the vast majority of advisors committed to serving
workplace retirement plans were well along the path of satisfying
ERISA’s compensation strictures, and the Best Interest Contract
Exemption (BICE) – with all its shortcomings – provided a means for the
rest to work their way there. What many found most confounding about the
Labor Department’s fiduciary rule was its extension of oversight to
IRAs, notably the enormous IRA rollover market – and, in that regard at
least, the SEC proposal seems to be reasserting its authority. Will that
be an area of “compromise” between the agencies? Time will tell.
Ultimately, the current SEC proposal – and bear in mind, this is
really just a starting point – is bound to disappoint more than it
pleases, if only because it introduces an element of uncertainty at a
particularly critical time. Many, having waited nearly a decade for
the proposal to emerge, doubtless hoped it would be more proscriptive
in scope and/or detail. Indeed the industry commentary thus far seems to
be a sense that it feels half-finished, rushed to press, perhaps even
opportunistic in its timing, what with the ink on the 5th Circuit’s
decision still damp. Let’s face it, even the SEC commissioners who
supported its publication did so with cautioning commentary, if not outright reluctance.
That said, having waded through the 1,000-plus pages twice and half
again, one can’t be help but be struck by the amount of space in those
1,100 pages dedicated to questions from the proposal’s authors –
questions that merit consideration and thoughtful response.
The work may be unfinished, it may be unsatisfying in scope or
clarity, but we now have a window (albeit a short one) – and an
invitation – to comment, inform, and yes, perhaps even remedy those
- Nevin E. Adams, JD