House Passes Bill to Block SEC's "Retail Best Interest" Rulemaking Package

In a 224 to 196 vote, the House of Representatives passed an amendment to the Financial Services and General Government Appropriations bill that would prohibit the SEC from implementing, administering, enforcing or publicizing Regulation BI and related rules and interpretations recently adopted by the SEC. (As previously covered, the rulemaking package consists of (i) Regulation Best Interest ("Reg. BI"), (ii) the Form CRS Relationship Summary, (iii) an interpretation of investment advisers' fiduciary duty and (iv) an interpretation of the "solely incidental" prong of the broker-dealer exclusion under the Advisers Act.)

Representative Maxine Waters (D-CA), chair of the House Financial Services Committee, and who introduced the amendment, had previously issued a statement critical of these rules. The "de-funding" approach is similar to an approach taken in the previous Congress with respect to the "fiduciary" rules adopted by the Department of Labor.

SIFMA urged members of Congress to vote "no" on the amendment, praising Reg. BI. SIFMA argued that regardless of whether Congress does block Reg. BI funding, firms still would be required to follow the rule. However, SIFMA warned, in that scenario (i) firms and customers would not be able to receive any guidance or education from the SEC, and (ii) the SEC would not be able to pursue any enforcement actions under Reg. BI.