PLANADVISER - January/February 2020 - 8

compliance news //
does not admit wrongdoing of any kind
regarding the ESOP transaction or this
action. " Nevertheless, Wilmington
Trust has agreed to pay $5 million into
a settlement fund. The court document
argues that " a settlement of
$5,000,000-approximately
$12,000
per participant before fees and other
costs are applied-is a good result for
the Class. "
The motion cites as one reason for
settlement " probable costs, in both time
and money, of continued litigation. "
The case has continued since a recommended
decision was made in August
2017 that favored Wilmington Trust.
Chief U.S. Magistrate Judge Mary
Pat Thynge of the U.S. District Court
for the District of Delaware found
that the plaintiffs lacked standing for
subject matter jurisdiction because
they did not allege an economic injury.
Thynge's recommendation allowed for
the parties to serve and file specific
written objections within 14 days after
being given a copy of her report. A
review of the docket for the case shows
those were filed, as well as many other
motions over the more than two years
since. -PA
Opposition, and Support, Continue for Reg BI
THIS PAST OCTOBER, the U.S. District Court for the Southern
District of New York dismissed a consolidated lawsuit
seeking to derail implementation of the Securities and
Exchange Commission (SEC) Regulation Best Interest (Reg
BI) rulemaking package.
Legal experts suggest that the 2nd U.S. Circuit Court
of Appeals is unlikely to take up the case and side with
plaintiffs to halt Reg BI-even if it does, a Supreme Court
ruling could then be required to ultimately stop the Trump
Administration's push to implement the new conflict of
interest standards. Still, various parties, including some
fiduciary advisory firms, consumer advocates and a group
of progressive states' attorneys general, continue to urge the
2nd Circuit to stop the rulemaking.
These opponent argue that Reg BI fails to meet the
Congressional mandate established in the Dodd-Frank Act,
the sweeping financial industry reform law named for two
former Democrat legislators-Christopher Dodd and Barney
Frank-who have actually filed their own brief in this matter
before the 2nd Circuit. According to Dodd and Frank, one
of the regulatory shortcomings their eponymous 2010 act
addressed was the inconsistency between the standards of
conduct applicable to broker/dealers (B/Ds) and investment
advisers when providing investment services to consumers.
Dodd and Frank posit that, as Congress was crafting
the Dodd-Frank Act, it knew expecting a full economic
recovery was unlikely without restoring the public's trust in
markets by eliminating the consumer confusion caused by
these different standards of care. To address that problem,
Congress directed the SEC to conduct a study on the effects
of the different standards of conduct for broker/dealers and
investment advisers, and to make relevant recommendations
to address any inconsistency between the standards.
" Congress also provided that any rule responding to a
regulatory gap in this area must provide for a uniform fiduciary
duty to apply to all broker/dealers and investment
advisers, " Dodd and Frank argue. " The Dodd-Frank Act
explicitly required that this uniform standard 'shall be to
act in the best interest of the customer without regard to
the financial or other interest of the broker, dealer or investment
adviser providing the advice.' "
Their brief concludes that Reg BI violates Congress'
mandate in Dodd-Frank Section 913, which required that
any rule promulgated to address the inconsistent standards
of care between investment advisers and broker/dealers
must harmonize those standards of care.
" The rule therefore canThese
opponents
argue
that
Reg BI fails
to meet the
Congressional
mandate
established
in the Dodd-
Frank Act ...
not stand, " Dodd and Frank
argue.
Notably, Reg BI continues
to receive strong support
from other stakeholders,
including the majority of
the financial adviser, insurance
agent and broker/dealer
community. In fact,
groups
these
are
concurrently
seeking to halt individual
states' efforts to create local
conflict of interest mitigation
frameworks that go
well above and beyond those
programmed into Reg BI.
Ground zero for this fight
is in the Commonwealth of
Massachusetts, where Secretary
of the Commonwealth William Galvin recently signed
off on the proposal of a rule that would impose an explicit
fiduciary conduct standard for all broker/dealers, agents,
investment advisers and representatives working in the state.
One public comment letter submitted to Secretary
Galvin summarizes the skeptical argument nicely: " The
SEC's recently adopted Regulation Best Interest establishes
a workable national best interest standard of conduct that
provides a significant strengthening of the standard of
care for broker/dealers and their representatives while
also preserving the existing business models (advisory and
brokerage) that consumers want and need. In addition, the
National Association of Insurance Commissioners is in the
final stages of amending its model regulation on annuity
recommendations and sales to include a best interest standard
that aligns well with the SEC's Reg BI. " -John Manganaro
8 | planadviser.com January-February 2020
http://www.planadviser.com
PLANADVISER - January/February 2020

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