The incoming Biden administration should undo a slew of recently enacted regulations, including the Securities and Exchange Commission's new best-interest standard and expansion of individual investors eligible to participate in private markets, a prominent House Democrat said.
House Financial Services Committee Chairwoman Maxine Waters, D-Calif., wrote a letter to President-elect Joe Biden on Dec. 4 in which she highlighted dozens of regulations promulgated during the Trump administration that she said should be rescinded or replaced.
Under the Trump administration, the SEC has "taken several actions that have eroded shareholder rights, established regulatory barriers to shareholder engagement, increased issuer involvement in the proxy voting advice process and stripped away fundamental investor protections, including safeguards around private markets, where investors have few protections," Ms. Waters said in the letter.
She urged the incoming administration to rescind the SEC's best-interest standard — known as Reg BI — which went into effect June 30 and aims to compel brokers to put clients' financial interests ahead of their own and requires them to mitigate financial conflicts.
Moreover, she also called for rescinding Form CRS — a part of the Reg BI rule package that requires firms to disclose to retail investors the nature and scope of their services, the types of fees customers would incur, the conflicts of interest faced by the firm and the firm's disciplinary history.
The Biden administration should also take steps to "rein in private equity, hedge funds, and other investment funds that engage in predatory investment practices," Ms. Waters said in the letter. Separately, she called on the new administration to roll back the SEC's efforts to provide retail customers with more access to private equity, including the SEC's final rule expanding the definition of accredited inventors, which was adopted in August.
The SEC’s changes to the rules governing proxy advisory firms should also be rescinded, Ms. Waters said. In July the SEC adopted amendments that require those firms to disclose conflicts of interests to clients and allow companies that are the subject of voting advice to be able to access that advice before or at the same time the advice is disseminated to clients.
The five-member SEC currently has a 3-2 Republican majority, with SEC Chairman Jay Clayton set to step down at the end of the year. Mr. Biden will appoint the next SEC chair, ostensibly giving Democrats a 3-2 majority, though he has yet to name a nominee.
Ms. Waters also raised the issue of climate change, which she referred to as one of the most pressing systemic risks facing the nation's financial stability. She urged Mr. Biden to "immediately end Treasury's silence on this critical issue and issue an executive order to address climate change at financial regulatory agencies to prioritize climate change as part of their oversight regulation of our nation's financial institutions."
Mr. Biden said he will nominate Janet Yellen, former Federal Reserve chairwoman, as Treasury secretary and has appointed John Kerry, former secretary of state, as special presidential envoy for climate.