Consumers Benefit from Regulation BI

The bar on consumer protections is raised in important ways by the Securities and Exchange Commission’s (SEC) Regulation Best Interest (Reg BI), which goes into effect at the end of this month.

Reg BI preserves access for middle- and lower-income savers to financial professionals that offer the opportunity to set up income guaranteed for life. Insurance agents and other financial professionals provide consumers with important information and education about annuities, the only private-market product that delivers guaranteed lifetime income. This means a reliable income stream, even during the kind of extreme market volatility seen in the COVID-19 pandemic.

First circulated last June, Reg BI’s strong consumer protections apply to recommendations regarding securities and to account opening and retirement asset rollover recommendations.

Reg BI substantially enhances obligations beyond the current suitability requirements and establishes that:

• Consumers receive information on the types and scope of services offered and the compensation to be received by the financial professional.
• Broker-dealers must act in the best interest of their customers and not place their own interests ahead of the customer’s interests.

Importantly, Reg BI aligns with efforts by the National Association of Insurance Commissioners (NAIC). The NAIC worked closely with the SEC to develop parallel protections for fixed annuities. ACLI seeks to have states adopt these new NAIC model protections. As more states follow the lead of Iowa, consumers will have harmonized state and federal standards for fixed and variable annuities.

Criticism of Reg BI is off base. Broker-dealers must comply with specific obligations to ensure they are acting in the best interest of their customers. If they fail to meet any of these obligations, they will be subject to enforcement actions.

Reg BI will safeguard access to savings options and financial security for Americans. It recognizes that not everyone has the asset threshold needed to access financial advisors that are paid each month or on a percentage of assets. And it provides consistent certainty, transparency, and clarity for consumers nationwide, at an important time.