Blogger and XY Planning Network co-founder MichaelKitces.

Popular advisor and Nerd's Eye View blogger Michael Kitces says he remains "as confident as ever"that the U.S. Court of Appeals for the 2nd Circuit will affirm XYPlanning Network's lawsuit against the Securities and ExchangeCommission's Regulation Best Interest and delay the rule'sJune 30 compliance date.

Both XYPN, which Kitces co-founded, and the attorneys generalfrom seven states filed briefs on Dec. 27 in the 2ndCircuit. The cases are consolidated because they addressoverlapping issues.

Kitces told our BenefitsPRO's sister site ThinkAdvisor in anemail on Friday that he was confident the court would "affirm ourarguments, both on the basis of Dodd-Frank (akin to the states'lawsuit) but also the unique arguments we've raised with respect tothe Investment Advisers Act of 1940 (that were uniquely raised inthe XYPN lawsuit)."

XYPN's Dec. 27 filing argues that Reg BI"exceeds the authority given to the SEC by the Dodd-Frank Act," asthe law "provided the SEC with the authority to 'promulgate rulesto provide that, with respect to a broker or dealer, when providingpersonalized investment advice … the standard of conduct for suchbroker or dealer with respect to such customer shall be the same asthe standard of conduct applicable to an investment adviser'" underthe Investment Advisers Act.

The SEC "had authority under Dodd-Frank not to issue such aregulation," the filing continues, "but Dodd-Frank did not grantthe SEC additional authority to create a new, different standard ofconduct governing broker-dealers providing personalized investmentadvice."

XYPN also argues that under Reg BI "a broker-dealer is permittedto take into account its own personal interests in providingrecommendations and advice to investors on how to invest their lifesavings. This new rule means that broker-dealers may maintainharmful conflicts of interests while being able to marketthemselves as trusted advisers acting in their client's bestinterests."

The rule "thus circumvents a key goal of Dodd-Frank — levelingthe playing field — and increases investor confusion."

The SEC has until early March to reply to the XYPN and state AGbriefs. "Our final response to the SEC will come in late March,"Kitces said Friday.

XYPN's lawsuit against Reg BI "is still on track to be decided(and as we hope and anticipate, [the rule will be] vacated)" beforeReg BI's June 30 effective date.

"If delays arise, or the Appeals Court takes a long time todecide the case, we may still pursue further action to delay theReg BI implementation date," Kitces added.

"But frankly, it is our hope that, win or lose, the AppealsCourt decides quickly, so the industry knows one way or the otherif Reg BI is going to stay, or is being vacated."

Kitces told ThinkAdvisor in a previous interview that the court"would have to vacate Regulation Best Interest or, alternatively,if the SEC is willing to modify the rule and state that financialplanning advice is investment advice that is not solely incidental,that would put Reg BI back in compliance" with Dodd-Frank.

Todd Cipperman of Cipperman Compliance Services agrees in his2020 predictions that due to the lawsuits, "the SEC will have todelay implementation [of Reg BI] and perhaps rewrite the rule inresponse."

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