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The Securities and Exchange Commission (“SEC”) isn’t the only regulator actively facilitating environmental, social and governance (“ESG”) investment strategies. Last week saw major developments at the U.S. Department of Labor (“DOL”) and the European Union (“EU”). The DOL removed potential roadblocks established by the previous administration, while the EU began implementing new disclosure regulations. On Monday, the acting chair of the SEC also continued her push for enhanced climate change and ESG disclosures.

On June 5, 2019, the U.S. Securities and Exchange Commission (“SEC”) adopted a package of rules and interpretations relating to the standards of conduct for broker-dealers and investment advisers, including a new “best interest” rule for broker-dealers. The package was adopted by a 3-1 vote, with Commissioner Robert J. Jackson Jr. as the lone dissenter. Chairman Jay Clayton, who supported the package, stated that the SEC was not adopting a uniform fiduciary rule for broker-dealers and investment advisers. Instead, Chairman Clayton explained that “Regulation Best Interest incorporates fiduciary principles, but is appropriately tailored to the broker-dealer relationship model and will preserve retail investor access and choice.” Chairman Clayton, as well as the SEC’s press release, emphasized that Regulation Best Interest cannot be satisfied by disclosure alone, but rather through compliance with each of the rule’s four substantive obligations.

The actions taken on June 5 include the following:

At lunch with my broker the other day (my tab naturally), I asked the waiter for a hamburger and soda, but my broker interjected and told him to bring me a kale salad, no dressing, and a carrot and beet smoothie. “I’m supposed to look after your best interest,” my broker said, “and you’re clearly a bit overweight. By the way, I have scheduled an hour with your personal trainer after lunch.” I couldn’t deny it; this was all in my “best interest.”

Welcome back for Part 4, the final installment in our discussion of the SEC’s April 18, 2018 fiduciary rulemaking proposal (the “Proposal”). We will summarize the SEC’s proposed Regulation Best Interest (“Regulation BI”), which seeks to create a “best interest” fiduciary duty standard for broker‑dealer relationships with retail customers. We will then delve into some of the specific requirements and open questions surrounding the regulation.

Welcome back for Part 3 of our discussion of the SEC’s April 18, 2018, fiduciary rulemaking proposal (the “Proposal”). Here, we dive into the SEC’s proposed Form CRS Relationship Summary and its proposed amendments to Form ADV. We also discuss the proposed rulemaking to restrict broker‑dealers’ use of the term “adviser” and variations thereof.

This post continues our discussion of the SEC’s April 18, 2018, fiduciary rulemaking proposal (the “Proposal”). Here we address the Proposed Interpretation Regarding Standard of Conduct for Investment Advisers and Request for Comment on Enhancing Investment Adviser Regulation portion of the Proposal which would, in sum, (i) restate advisers’ fiduciary duties under the Advisers Act and (ii) impose a variety of new requirements on advisers similar to those applicable to broker-dealers.

On April 18, 2018, the SEC held an open meeting where it approved the long‑awaited and much-discussed fiduciary rulemaking proposal package. The proposal primarily recommends disclosure- and principles and procedures-based rules, and has garnered three main criticisms: (1) it would establish a “best interest” standard without defining the term; (2) while intending to provide clarity, it would likely generate litigation around the scope of the restated investment adviser fiduciary duty; and (3) it fails to cover how a new “relationship summary” disclosure would function in the robo-adviser context. Part one of this series provides a high‑level overview of the recent history behind the proposal and summarizes its key provisions. Forthcoming posts will discuss the proposal in greater detail and suggest key takeaways for investment advisers.

I have spoken for years about the importance of contingency planning for money market funds. So I understand why business continuity and transition planning is a great idea for investment advisers. I’m troubled, however, by the SEC’s recent proposal to require advisers to maintain such plans. My troubles lie more with their means than with their ends.

A recent Majority Staff Report from the Senate Committee on Homeland Security and Governmental Affairs raises some concerns. Some of my concerns relate to the state of our federal government. (Should congressional staff spend time composing philippics against an executive department? Does the prospect of exposure of inter-agency emails have a chilling effect on communications? Why has the Senate conjoined homeland security with governmental affairs?) More significantly, an email exchange cited in the report challenges my understanding of fiduciary law.