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Advocacy in action blog

Senators Ted Cruz and Bill Hagerty have introduced legislation, the Protecting Innovation in Investments Act, that would prevent the SEC from moving forward with a proposed rule that would deter technological innovation by financial services companies. The SEC's proposal would also stifle financial professionals' use of technology to benefit clients. 

The Senators, in a release entitled "What They're Saying," quoted NAIFA President Tom Cothron, LUTCF, FSCP, on the importance of technology in the financial services industry and NAIFA's opposition to the SEC proposal.

“Investment advisers and broker-dealers rely on technology to both directly and indirectly benefit investors by providing efficiencies that reduce costs. The SEC Proposed Rule broadly classifies technology used in connection with investment issues and imposes new burdensome requirements without an analysis of any corresponding benefits of technology,” Cothron said. “NAIFA strongly believes that modifying the existing regulatory structure to adopt new conflict of interest rules for PDA technology is unnecessary at this time and will hurt the future development of technology that will benefit consumers.” 

Among NAIFA’s main objections to the proposed rule are:

  • The proposal fails to provide a thorough practical or economic analysis of the proposed rule. Such an analysis, which is required by law, would likely find that the financial services industry uses technologies that would be impacted by the rule to better serve clients and reduce costs. The proposal is likely to sharply increase costs for financial professionals without benefitting consumers. It would reduce savings and financial planning opportunities for the consumers it aims to protect.
  • The is overbroad in its classification of technology.
  • The proposal is at odds with the SEC’s Regulation Best Interest, which provides strong protections for consumers and provides ways for financial professionals to deal with potential conflicts of interest without reducing consumers’ choices or ability to receive products, services, and advice.
  • Reg Bi and the NAIC’s model regulation for annuity transactions already require financial professionals to act in clients’ best interests.
  • The proposed rule would have a devastating impact on low- and middle-income investors. It would discourage the use of technology for smaller accounts and create barriers that would prevent the industry from serving these consumers.

NAIFA previously contributed to letters submitted Sept. 12 and Sept. 19 by a coalition of industry groups and submitted its own comment letter to the SEC.