It would be a useful exercise to go back to the early stages of debate over Dodd-Frank and the initiation of regulation so as to collect the predictions as to what the law would accomplish. A fair number of the claims flew in the face of Econ 101, including that an increase in regulatory requirements (fixed costs) would lead to an increased number of service providers. Likewise, there were predictions that an increase in the costs of regulation would only impact "Wall Street" and leave "Main…

The on broker-dealers that provide clients with recommendations, combined with the potential great diversity of state regulation, is a blow to the business model of "full-service brokerage." (See for additional commentary on how Reg. BI may affect full service brokerage.)

Firms continuing to provide a full-service brokerage option to retail customers will need to review their procedures for dealing with retail customers very thoroughly.

Mr. Kothari's remarks illustrate a policy tension created by the collection of big data by the financial regulators. On the one hand, the aggregation of tremendous amounts of data by the regulators will be vulnerable to theft by bad actors. On the other, the Consolidated Audit Trail will allow regulators to collect an unprecedented amount of information, which will be a target for bad actors.

Regulators continue to pretend that investors can receive the benefit of a dedicated investment adviser while paying (low) transaction based fees. (See also .) That seems inconsistent with economic reality. The result is a move to a system where broker-dealers either decline to provide their clients with recommendations or provide only very generic advice; if investors want more, they will have to pay an investment adviser. Maybe this would be a good result, but the regulators should not…