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IBD Execution: ‘Tough’ Regulatory Landscape, Back-to-Work Uncertainty

Today’s regulatory environment is becoming increasingly difficult for brokers in the independent space, several CEOs of broker-dealer firms argued during a panel discussion at the financial services institution’s annual OneVoice conference in Dallas this week.

In a talk moderated by FSI President and CEO Dale Brown, Lincoln Investment President and CEO Edward Forst expected the coming year to “tighten the noose” through enforcement of Regulation Best Interest (Reg BI). .

“And I think 2022 is the year they’re going to come after us, because I don’t think they have a lot of time left in power in Washington,” Forst said, indicating the Democrats’ hold on regulatory agencies. Through his control of Congress and the White House. “I think they’ll use Reg BI; they don’t need to change the wording, they’ll just change the interpretation of it.”

Forst and Brown were joined by Jodi Perry, president of Raymond James Financial Services, and Alex David, president and CEO of Stifel Independent Advisors, who both agreed that compliance was an increasingly difficult task under Securities and Exchange Commission chairman Gary Gensler. Additionally, Perry said she was concerned that states were considering their own rules.

“How many states are going to come forward with privacy rules and their own versions of fiduciary rules and stuff like that?” he said. “To me, it looks like it could be going in a lot of different directions, but it certainly looks like it’s still going in a more difficult direction than we’d expect.”

With the inauguration of Joe Biden and the appointment of Gensler, former chairman of the Commodity Futures Trading Commission, to serve as head of the SEC, as well as the recruitment of several prominent investor protection advocates, the b/d industry’s potential is a decidedly different one. confronts the regulatory system. previous years during the tenure of former Chairman Jay Clayton.

Prior to the 2020 election and after joining Gensler’s office as a senior advisor, former Consumer Protection Director of the Consumers Association of America Barbara Roper suggested it would be better for the SEC to introduce regulation to provide better investor protections. Use the ‘framework’ of BI, rather than eliminating the rule altogether.

When Brown asked him about a change in the regulatory environment, David cited the length of the comment period after the new rules were proposed, wanting to see it extended to a window of 90 to 120 days instead of 30 days. (SEC Commissioner Hester Peirce has previously advocated long comment periods as the norm).

David also questioned the effectiveness of the “explanatory nature” of the SEC rules. Should the Commission’s standards for broker conduct be ‘principles-based’ or allow for more flexible interpretation – and potentially become more prescriptive at the will of heavy-handed regulators – a point of controversy during the debate around Reg. was a constant point. two; In 2018, the FSI commended the regulators for sticking to the principle-based standard. David drew an analogy with the Food and Drug Administration, suggesting a scenario where food manufacturers could explain consumer safety standards for a product.

“It would be chaos. But they’re too restrictive and stringent and short and concise on ‘it’s allowed, it’s not allowed.'” I’m not necessarily advocating for them to be more prescriptive, (but) maybe I am . Rule-based and then there’s such a huge gap of interpretation, where it’s ‘Sorry, you got it wrong.'”

In the discussion, the three CEOs also detailed the weak state of the industry’s office-to-office plans, and the myriad ways the Omicron version had changed plans for a new normal. Frost said that Lycon employees were back in the office two days per week, and were expected to move to the office three days per week at some point in the first quarter.

At Stifel, David said he has allowed offices across the country to make their own decisions based on local conditions, and with some flexibility to bring employees back to the office in the St. Perry said that Raymond James divided employees into three camps, including ‘resident’ (defined in the office most of the time), ‘mobile’ (those who were in the office at the time) and ‘remote’ (those who worked entirely ) were included. out of the office). Perry said the changes made to remote work were a “huge transition”, and while there was no set date yet to return, they were encouraging employees to return to the office at least one day a week. .

For Forst, the question of whether someone would be let go if they did not want to return to the office was a ‘struggle’, while he believed that overall the firm was much better off staying in the office. .

“I think we’ve increased processing and productivity really well during remote, so that’s about as good as it can be,” he said. “But solving complex problems? I’d say we’re doing less well, but I’m not sure I’d lose anyone on something like working in the office versus not working in the office.”

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