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WASHINGTON, DC – The American Securities Association (ASA) today submitted comments to the U.S. Securities and Exchange Commission (SEC) on its proposed rulemaking regarding the use of predictive data analytics by broker-dealers and investment advisers. ASA opposes the entire Proposal, including its evisceration of the well-functioning Regulation Best Interest national standard, the use of an overly broad and vague definition of “covered technology”, and the lack of legal authority to adopt such a rule.
“Since Reg BI was finalized, well-funded special interest groups and activist state regulators have sought to undermine its effectiveness by attempting to impose new rules on firms that would cut off access to financial advice for low-income investors and increase liability. This proposal is a brazen reminder that those efforts continue,” said ASA President & CEO Chris Iacovella. “The Proposal fails to acknowledge that Reg BI’s conflict requirements already apply to ‘covered technologies’, and it does not explain why those technologies should be treated any differently than other activities Reg BI already covers. The SEC missed the mark so badly with this proposal that we recommend it be withdrawn so that financial services firms can continue helping America’s working families, retirees, and first-time savers create, grow, and protect their wealth as we have for over a century.”
In the letter to the SEC, ASA outlined numerous concerns associated with the Proposal and made specific comments in the letter which are highlighted below:
I. The Proposal Guts Regulation Best Interest Standard & Unlawfully Imposes Fiduciary Standard. “If adopted, this would force broker-dealers and investment advisors to abstain from using certain technologies and/or limit or eliminate communication with a substantial portion of their client base. It is also a direct attack on a registered representative’s ability to take payment in exchange for providing investment recommendations.”
II. The Definition of “Covered Technology” is Overly Broad, Vague & Ambiguous. “The breadth of the Proposal would effectively make it impossible for firms to communicate with their clients in certain circumstances or even to provide basic information about markets or a customer’s portfolio holdings.”
III. SEC Lacks Legal Authority to Adopt Proposal. “Citing multiple sections of differing statutes illustrates the lengths this SEC will go to create legal authority Congress never expressly provided.”
IV. SEC Failed to Adequately Consider Economic Costs of Proposal. “The consistent and pervasive use of the wrong cost of compliance estimates throughout the Chairman’s regulatory agenda intentionally masks the true amount of monetary resources regulated entities are forced to redirect to lawyers and consultants in the professional class. It also intentionally slants the cost-benefit analysis in favor of whatever ideological policy the Chair wants the Commission to adopt. This begs the question: Why is the SEC adopting a regulatory agenda that enriches a politically connected professional class at the expense of America’s retail investors, small businesses, and market participants?”
ASA’s comment letter is available here.
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About the American Securities Association
American Securities Association, based in Washington, DC, represents the retail and institutional capital markets interests of regional financial services firms who provide Main Street businesses with access to capital and advise hardworking Americans how to create and preserve wealth. ASA’s mission is to promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets. This mission advances financial independence, stimulates job creation, and increases prosperity. The ASA has a geographically diverse membership of almost one hundred members that spans the Heartland, Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States.