Publication
Bloomberg Law 
12.31.2019

The ink was still wet in the Federal Register when seven states and the District of Columbia filed a complaint on Sept. 9 against the Securities and Exchange Commission seeking to vacate the key component of its “generational” rule package that, most notably, imposes an enhanced “best interest” standard of conduct on broker-dealer interactions with retail clients.

Meanwhile, a network of investment adviser plaintiffs filed their own complaint the same day seeking the same relief.

The complaints, filed in the U.S. District Court for the Southern District of New York, are consolidated and pending before the Second Circuit Court of Appeals. Simultaneous with their filing in the Southern District, the states petitioned the Second Circuit to hear their complaint due to that court’s exclusive jurisdiction to decide rule challenges arising out of the Securities Exchange Act of 1934. The lower court consolidated the complaints and dismissed them for lack of subject matter jurisdiction “in favor of further litigation … before the Second Circuit.”

Notably, neither set of plaintiffs sought emergency relief in their complaints. With final briefs due in late March 2020, the Second Circuit will likely not issue a decision until shortly before Reg BI’s June 2020 implementation deadline.


This article first appeared on the Reg BI litigation for Bloomberg Law Insights. Click here to read the full article on their website.

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