In an opinion published last Friday, the Second Circuit Court of Appeals upheld the validity of the SEC’s Regulation Best Interest and rejected the challenge to the rule which had been filed last fall by a group of state attorneys general and several private financial firms. The court did not agree with the plaintiffs’ claim that the Dodd Frank Act required the SEC, if it chose to act, to adopt a standard of conduct for broker-dealers that paralleled the fiduciary standard applicable to investment advisers under the Investment Advisers Act.

In a unanimous decision by the three judge panel that heard the case, the court held that “the Dodd Frank Act grants the SEC broad rulemaking authority" and said that the SEC had not acted in an arbitrary and capricious manner, but rather had acted properly in developing and adopting Reg BI.

The plaintiffs would have the option of appealing the decision to the U.S. Supreme Court. Following the release of the decision,  they released a statement saying they “will be exploring our options about whether to challenge this ruling further.“

Reg BI is now cleared to go into effect on Tuesday, June 30.