InvestmentNews reports that the two lawsuits filed last week against the SEC challenging its Reg BI package will likely lead to an extended legal battle.

The industry publication turned to Drinker Biddle partner Jim Lundy for insight into the lawsuits.

One of the suits was brought by seven states’ attorneys general and the District of Columbia. They argue the SEC violated the Administrative Procedure Act by promulgating a broker requirement — Reg BI — that failed to follow lawmakers’ direction in the Dodd-Frank financial reform law to formulate a uniform standard of conduct that is no less stringent than the fiduciary duty that currently applies to investment advisers.

A separate suit filed by XY Planning Network and Ford Financial Solutions also argues that the SEC sidestepped Dodd-Frank. In addition, it claims Reg BI puts investment advisers at a competitive disadvantage because “it makes it more difficult to differentiate their fiduciary standard of conduct from the lower standard of conduct now applicable to broker-dealers.”

Lundy questioned whether Dodd-Frank gave the SEC a specific directive for raising advice standards and whether the agency can successfully be charged with violating the Administrative Procedure Act.

“If I was a betting man, I would bet against them,” Lundy said of the lawsuits. “It’s unclear to me whether the allegations have that direct level of support in the statute.”

As for the sec’s response, Lundy believes the sec is “going to aggressively and vigorously fight these lawsuits as best they can.”

Source: InvestmentNews
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