Good afternoon,
Things are changing in the Attorney General’s Office
We saw evidence of this when AG General Kathy Jennings joined eight other Democrats holding the post in filing a suit challenging the Securities & Exchange Commission’s “Regulation Best Interest.” The AG’s claim the regulation fails to provide investor protections that were laid out in the 2010 Dodd-Frank Act.
“Thousands of Delawareans entrust their financial futures to broker-dealers and trust that they are receiving the best investment advice possible. But the federal agency responsible for protecting investors has failed to follow Congress’ direction to ensure that broker-dealers are held to the same high fiduciary standard that investment advisors must follow under federal law,” Jennings stated in a release.
The SEC in June adopted Regulation Best Interest, which was said to address long-standing investor confusion concerning the standards of care in providing investment advice.
This confusion led to put in a provision in the 2010 Dodd-Frank Act that authorized the SEC to draft regulations that would align the standard of conduct for broker-dealers and investment advisors.
Some changes have been made via regulation and industry practice in areas such as disclosing fees and signing off on changes.
Still, the Attorneys General see the regulation as vague and toothless in dealing with the issue of the fiduciary duty to the investor versus the broker’s desire to maximize commissions.
Jennings, through the state’s Investor Protection Unit, joined attorneys general in New York, California, Connecticut, Maine, New Mexico, Oregon, and the District of Columbia in filing the lawsuit.
In the past, the Delaware AG’s office had been cautious about jumping into such matters. After all, many large financial services companies are incorporated in Delaware or have employment centers in the state.
Democratic AGs in Maryland, New Jersey, and Pennsylvania did not sign on to the lawsuit, at least initially. All three states have a sizable number of financial services jobs.
Jennings ran her campaign on a promise of taking a more activist stance in consumer protection.
Whether that backfires when companies are thinking about expansion or consolidation of operations remains to be seen.
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