XY Planning Network sues SEC over Reg BI

XY Planning Network, the coalition of fee-only financial planners founded by Michael Kitces and Alan Moore, is suing the Securities and Exchange Commission for creating what they say is an unfair competitive advantage for broker-dealers with the agency’s Regulation Best Interest investment-advice rule.

Mr. Kitces and Mr. Moore filed the suit Tuesday in the U.S. District Court for the Southern District of New York.

The lawsuit follows a similar lawsuit filed Monday by seven states and the District of Columbia against the SEC and agency chairman Jay Clayton claiming the investment-advice rule, which is meant to lift the standard for how brokers work with clients, is too weak.

Like the states, XYPN says the SEC ignores a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that says regulations for broker-dealers should be no less stringent than those for registered investment advisers when it comes to delivering financial advice.

But XYPN is also arguing that Reg BI fails to meet rules laid out in the Investment Advisers Act of 1940 that require anyone delivering financial advice for compensation to register as an investment adviser and be subject to the fiduciary standard. Under Reg BI, neither brokers nor dual registrants who market and deliver financial planning services are required to register as an investment adviser, Mr. Kitces said.

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“The SEC has now allowed the

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