SEC’s Own ‘Best Interest’ Regs Might Ban Sales Commissions: Legal Analyst
April 9, 2019 by Allison Bell
Many observers are assuming that the U.S. Securities and Exchange Commission’s Regulation Best Interest proposal would be easier on life insurance agents and brokers than some states’ tough fiduciary rule, best interest and suitability measures might be.
But, in the real world, the SEC’s Regulation BI might be tougher on agents than expected, because the courts might focus purely on the text of Regulation BI itself, and ignore SEC supplementary materials that appear to soften the effects of Regulation BI, according to a lawyer who is helping state insurance regulators analyze the U.S. Securities and Exchange Commission’s Regulation Best Interest proposal.
Douglas Schmidt, a partner at Husch Blackwell LLP in Kansas City, Missouri, told state insurance regulators recently, in a memorandum dated March 31, that how the courts read Regulation BI could depend on how clear, or fuzzy, they think the term “best interest” is.
Commissions and Captive Agents
If the courts thought “best interest” was a vague term, they might use the SEC’s supplementary materials to figure out what the SEC meant, Schmidt writes in the memo, which was prepared for the National Association of Insurance Commissioners (NAIC).
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