On June 20, 2019, Randy Seybold was quoted in Reuters on state efforts to fill gaps in the Security and Exchange Commission's (SEC) retail-investor rules.
According to the article, the diverging paths taken by state regulators and the SEC on investment advice and care standards has opened a nearly unprecedented divide that could reshape the regulatory landscape for finance firms and challenge the SEC's role as primary protector of retail investors. A prolonged period of uncertainty is likely for Wall Street compliance teams.
"The passage of the SEC rule has not brought the issue to anything near a close," said Seybold. "There will be a challenge for firms to remain aware of what the SEC has done and how it is implementing and applying the retail rules and being aware of what states are doing — either in a complementary way or in tension with each other. It's wait-and-see time."
The SEC hinted that legal action could arise if the federal and state rules are in conflict. When potential legal challenges related to laws imposed by states arise, their legality would be "determined by future judicial proceedings based on the specific language and effect of that state law," said the SEC in its Regulation Best Interest.
"It is entirely unclear what they will do," Seybold said, referring to the SEC's comment on the potential for legal actions arising from state laws. "This is not a normal occurrence, to see the states and the SEC so far apart on an important issue. It's kind of unprecedented."