Financial Advisor IQ (June 11, 2019) - Legal battles over the SEC’s Regulation Best Interest package may be imminent as consumer groups and legislators have already voiced staunch opposition, according to the National Association of Plan Advisors.

“The ink is not yet dry on the SEC’s new investment advice package, but the prospects of a looming legal battle have already surfaced,” according to a NAPA article published on its website. NAPA is made up of retirement industry professionals who support the interests of plan advisors.

The SEC approved its Regulation Best Interest package on June 5, as reported.

NAPA notes that the Public Investors Arbitration Bar Association and the Consumer Federation of America have issued “strongly worded” warnings that “the proposal will do more harm than good and that its true impact is being misrepresented by the SEC.”

“While SEC Chairman Jay Clayton’s plan is being pitched to the media and Capitol Hill as improving protections for retail investors, the truth is that it is actually a step backwards. It will leave investors with fewer protections in important areas than they would have had if the Commission had not acted,” the organizations say in a joint statement cited by NAPA.

“In many ways, this is a step backwards,” Christine Lazaro, president of PIABA, adds in the statement.

“Investors are being told their brokers will adhere to a best interest standard, but the brokers will not actually be required to act in their clients’ best interests. Were this a sales pitch for a public offering reviewed by the SEC, it would have to be determined to be false and misleading,” Lazaro adds.

Barbara Roper, CFA director of investor protection, says the best interest legislation is “a betrayal of the Mr. and Ms. 401(k) investors SEC Chairman Clayton pledged to protect when he launched this rulemaking,” the statement adds.

Doubts surrounding the best interest extend to Washington, according to the NAPA article.

Reg BI “ignores the explicit will of Congress and fails to require all financial professionals to abide by a strong, uniform fiduciary standard of care when providing investors with investment advice,” says Rep. Maxine Waters (D-CA 43rd District), chairwoman of the House Financial Services Committee, according to NAPA.

Waters has also encouraged the SEC to rescind the rule, which she says “could lower the standard that investment advisers currently abide by and mislead investors into thinking that brokers who comply with this new rule are putting their clients’ interests first,” NAPA reports.