Monday, 27 May 2019

Will the S.E.C. aid and abet fraud in 2019? A fictionalized grilling of Jay Clayton under truth ether reveals the perils – RIABiz

With brokers the special interest, the simple principle of putting client interests first, gets mangled in the wording. But two can play that game so Ron Rhoades fights back with his pen

Brooke’s note: While Ron Rhoades, RIABiz’s “One-Man Think Tank” was largely silent during 2018 in terms of his writings in industry publications, he has not-so-quietly been advocating at the S.E.C. and to other government agencies, through seven comment letters spanning a mere 318 pages and in several in-person visits to agency heads and staffers. See: Before taking a self-imposed vow of silence, Ron Rhoades sounds off on the RIA industry and tells what’s it’s like to hit a professional wall Ron advises that 2019 may well be a watershed year, in terms of defining standards of conduct for personal financial advisors – at the U.S. Securities and Exchange Commission, at the U.S. Department of Labor an at several state securities regulators. It will also be a defining year in state regulation of market conduct involving sales of life insurance and annuities and Certified Financial Planners. In this article, Ron takes the S.E.C. to task for its down-the rabbit hole way of reverting to suitability rules and using mirrors to suggest otherwise. Because no word goes untwisted by the influence of lobbyist cocktails, our Think Thank is going all Socrates here at full-moon Christmas. In other words, Ron Rhoades pulled out his fiction quill to imagine for us an exchange between the chair of a congressional committee and current chair of the Securities and Exchange Commission, Jay Clayton. See: A conversation between a wirehouse advisor and a senior citizen who seeks trust The hypothetical dialogue “would result from proper Congressional oversight – if procedural rules permitted extended questioning, and if those testifying before Congress would not seek to answer evasively and ambiguously,” Rhoades tells as preamble to this editor.

Here goes the back and forth related to the S.E.C.’s Regulation BI’s attempts to redefine the English language, hence misleading individual investors for all time to place trust in their brokers, even though the actual language of the rule is clear: Only an arms-length (seller-buyer) relationship exists.

Committee Chair: “Welcome, SEC Chair Clayton.”

Mr. Clayton: “Thank you, Madam Chairman.”

Committee Chair: “We are here today to discuss the U.S. Securities and Exchange Commission’s proposed Regulation Best Interest, also known as Reg BI. Mr. Clayton, are you ready for questions.”

Mr. Clayton: “More than ready, Madam Chairman.”

What the &!*#?

Committee Chair: “What the &!*# are you doing?”

Mr. Clayton: “Excuse me?”

Committee Chair: “I wish you would not only excuse yourself, but also recuse yourself, for all time.”

Mr. Clayton: “I don’t understand.”

Committee Chair: “That is readily apparent from the language of Reg BI. Why don’t we take it one step at a time.”