Posted on January 7, 2020

IRI Urges State Regulators to Evaluate Strong New Federal Regulation First
IRI Comment Letter

WASHINGTON, D.C. – Massachusetts consumers stand to lose access to vital retirement planning and other financial advice under a proposed state regulation, according to the Insured Retirement Institute (IRI), the leading national trade association for the retirement income industry.

At a Massachusetts Securities Division hearing today on a proposal to impose an additional layer of regulations on providers of financial advice, Wayne Chopus, IRI president and CEO cautioned regulators that, while well-intentioned, the proposed regulation could limit consumers’ access to valuable financial planning services and products.

Chopus urged that Massachusetts should allow the U.S. Securities and Exchange Commission’s Regulation Best Interest (Reg BI) to take effect and be allowed time to evaluate its strong consumer protections before additional, potentially duplicative regulations are considered. Reg BI is a federal standard of conduct rule that will take effect July 1, 2020.

“Reg BI represents a substantial strengthening of investor protection compared to existing law in a manner that is consistent with the principle that financial professionals should be required to act in their clients’ best interest when providing personalized investment advice,” Chopus said. “In our view, Reg BI will achieve the Division’s goals without the need for further rulemaking. Moreover, it does so in a manner that will preserve investor choice and access to the products and services they need to achieve their financial goals.”

The Massachusetts proposal seeks to impose a uniform fiduciary standard on broker-dealers and investment advisers. This ignores the differences between the types of financial professionals and could have an adverse impact on investor choice, cost, and investor access in the market for financial advice.

“Reg BI recognizes and seeks to preserve the important and valuable distinctions between different types of financial professionals,” Chopus said. “Reg BI will help investors understand the differences between broker-dealers and investment advisers, thereby enabling them to make informed decisions about the type of financial professional that would best meet their needs.”

IRI noted that implementation of the Massachusetts regulation would make the Bay State an outlier among other states and make it more difficult for financial services businesses to operate in the state.

“We fear that the proposal will drive firms to significantly scale back their offerings in Massachusetts or potentially even discontinue operating in Massachusetts,” Chopus said. “If this comes to pass, the citizens of Massachusetts will ultimately lose access to the wide variety of products and services available to other Americans to help them achieve their financial goals.”

Chopus added, “A fiduciary standard is not some sort of panacea. The new federal best interest standard is a substantial enhancement over current federal law and will adequately address Massachusetts regulators concerns about consumer protection. A person with bad intentions cannot be wrapped in a fiduciary tunic and somehow be transformed into a beacon of truth and honesty.”

Chopus concluded, “We respectfully urge the Division to refrain from finalizing the proposal at this time and to instead re-evaluate whether the proposal – or some variation thereof – is still necessary once Reg BI has been in effect long enough to assess its effectiveness.”

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