More On Legal & Compliancefrom The Advisor's Professional Library
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
Mary Jo White (left), President Barack Obama’s pick to be the next chairwoman of the Securities and Exchange Commission, said during her confirmation hearing before the Senate Banking Committee Tuesday that she would “commit” to reviewing the comments the agency receives on its fiduciary rule before releasing a proposal on the issue.
Sen. Mike Crapo, R-Idaho, ranking minority member on the committee, asked White if she, as SEC chairwoman, would commit to review the comments the agency receives on its request issued on March 1, which asks for public data regarding the "potential regulatory costs to implement potential changes to fiduciary standards for broker/dealers and investment advisors" before writing a rule. White responded that she would “absolutely” do that, as “this is an important area.”
Indeed, in her testimony, White said that one of her “focus” areas as chairwoman would be regulating the conduct of broker-dealers and investment advisors when giving retail investment advice.
While White said that finishing rulemaking mandates under the Dodd-Frank and JOBS Acts “in as timely and smart a way as possible” would be her top priority at the agency, she could not name her top three rulemaking priorities when asked by Sen. Jack Reed, D-R.I.
Stating that the Dodd-Frank and JOBS Acts have both placed a “daunting” task on the agency, White told lawmakers that once at the agency she intended “to personally take charge in assessing” which rules will be priorities.
White testified along with Richard Cordray, who was renominated by Obama to head the Consumer Financial Protection Bureau. Both White and Cordray received “softball” questions during the hearing, and White's confirmation by the full Senate is expected to receive little resistance.
White pledged to lawmakers that "the American public would be her client" and that she would "work zealously on their behalf."
Neil Simon, vice president for government relations at the Investment Adviser Association in Washington, says that he expects White will “have strong bipartisan support” as she is confirmed.
Larry Stadulis, a partner at Stradley Ronon in Washington, told AdvisorOne after the hearing that White “shined” when talking about her enforcement priorities for the agency.
She told lawmakers that it would be a “high priority” throughout her tenure “to further strengthen the enforcement function of the SEC,” stating that “it must be fair, but it also must be bold and unrelenting.” Investors and all market participants, she continued, “need to know that the playing field of our markets is level and that all wrongdoers—individual and institutional, of whatever position or size—will be aggressively and successfully pursued by the SEC.”
Besides Dodd-Frank and JOBS Act rules and enforcement issues, White said her other priorities would be to:
- Continue “rigorous economic analysis” to inform and guide commission rules;
- Fully understand “all aspects of today’s high-speed, high-tech and dispersed marketplace so that it can be wisely and optimally regulated, which means without undue cost and without undermining its vitality”; and
- Focus on money-market funds, private fund advisors, credit rating agencies and clearing agencies.
Despite the fact that the Financial Stability Oversight Council (FSOC) voted unanimously in November to advance proposed changes to money-market funds and seek public comment, White told lawmakers that money market funds are “investment products and the SEC should take the lead” in writing further rules to reform them.
Sen. Elizabeth Warren, D-Mass., told White that the CFPB has met “all” of its Dodd-Frank deadlines while the SEC has “missed about half.” The SEC, Warren said, has not written any rules regarding credit ratings agencies, derivatives or disclosure of CEO pay. “I hope these will be on the top of your list,” Warren told White.
Read Mary Jo White to Focus on Fiduciary Issue at SEC on AdvisorOne.
So how do advisors themselves feel about a stronger fiduciary standard for all advisors, and how are they “putting clients first” absent a single standard? We invite you to participate in the third annual fiduciary survey sponsored by AdvisorOne and Fi360.—Ed.