&l;p&g;&l;img class=&q;dam-image shutterstock size-large wp-image-1129136339&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/1129136339/960×0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Regulators are likely to press broker-dealers and other financial professionals to act in the best interest of investors even without the DOL fiduciary rule, a major law firm is predicting. Shutterstock
The best interest concept and similar investors protections are here to stay despite the death of the Department of Labor&a;rsquo;s fiduciary rule, predicted a report released today by the law firm of Arnold &a;amp; Porter.
&a;ldquo;(The Securities and Exchange Commission), FINRA and the states are leading the regulatory efforts to heighten the standard of care that financial institutions and their personnel owe to their customers,&a;rdquo; according to the study.
The Fifth Circuit Court of Appeals killed the fiduciary rule June 21 when the Trump Administration declined to appeal the panel&a;rsquo;s initial decision against the DOL regulation to the Supreme Court.
But even without the fiduciary rule, the firm said federal and state securities regulators,&a;nbsp; FINRA, state attorneys general, and the plaintiffs&s; bar have many tools available to make claims against financial services providers if potentially abusive sales practices are identified.
As signs the best interest concept is alive, the firm pointed to the SEC&s;s proposed&a;nbsp;&a;ldquo;Regulation Best Interest&a;rdquo; and the agency&s;s&a;nbsp;&q;Mutual Fund Share Class Selection Disclosure Initiative.&q;
The latter appears to borrow concepts from the fee structures required for ERISA plans and IRAs, the report noted.
Pointing out the SEC&a;rsquo;s Regulation Best Interest would a have broader application than the Department of Labor&a;rsquo;s fiduciary rule, the report noted the proposal would apply to all securities transactions or strategies that a broker-dealer or an associated adviser recommends to a retail investor, including ERISA plan and IRA rollovers.
&a;ldquo;(Regulation Best Interest) appears to call for a standard of conduct that is more than &q;suitability&q; but somehow less than &q;fiduciary,&q; and its ultimate parameters will be subject to development, debate and litigation,&a;rdquo; said the law firm.
The study added New York, New Jersey, Nevada and other states have imposed, or are considering imposing, best interest obligations or other enhanced standards on financial institutions and their personnel.
A proposal from the New York Department of Financial Services would require sellers of life insurance and annuities to act in the best interests of their customers.
At the same time, legislation is pending in New Jersey to obligate a financial services provider to provide specifically-worded written disclosures to individual investors to explain where there is no fiduciary relationship.
To see the full report, click on: &l;a href=&q;https://bit.ly/2KMMfVT&q; target=&q;_blank&q;&g;https://bit.ly/2KMMfVT&l;/a&g;.&l;/p&g;