More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The Securities and Exchange Commission said Monday that it would “continue to analyze” over the next five years whether to write a rule to put brokers under a fiduciary mandate — but the debate continues among industry officials about whether a rule proposal will surface within that timeframe.
In releasing the agency’s draft five-year strategic plan, which is out for public comment until March 10, the SEC said that it would “continue to analyze whether the different regulatory obligations that apply to broker-dealers and investment advisors providing personalized investment advice should be changed for the protection of investors.”
The Draft Strategic Plan outlines the agency’s strategic goals for fiscal years 2014 to 2018.
The SEC “will get to [releasing a fiduciary rule proposal] in less than five years, but not soon, probably not before the DOL has completed its rulemaking,” says Mercer Bullard, founder of Fund Democracy and associate professor at the University of Mississippi School of Law.
SEC spokesman John Nester says that the agency could indeed release a fiduciary rule proposal within the five-year time frame, despite the fact that the agency uses the words “continue to analyze” in the draft plan.
One industry official, however, doesn’t see the Department of Labor rereleasing as expected in August its plan to amend the definition of fiduciary under the Employee Retirement Income Security Act. The official, who asked for anonymity, believes the DOL will not repropose its contentious fiduciary rule so close to the November midterm election. “The broker and insurance companies have lobbied Congress hard – and obviously with some success – to get the DOL to back down on this one,” the official said.
Bullard said he saw DOL’s redraft of its fiduciary rule being sent to the Office of Management and Budget (OMB) “well before year-end.” However, he said, “I’m not sure how quickly OMB will move on it.”
Knut Rostad, president of the Institute for the Fiduciary Standard, says that the SEC’s strategic draft plan of analyzing whether the “regulatory obligations” of broker-dealers providing investment advice should be changed “is consistent with prior statements by [SEC] Chair [Mary Jo] White regarding the need to determine whether the commission should proceed with rulemaking.”
Says Rostad: “Likewise, as I have suggested, investment advisors should also re-evaluate whether they believe this rulemaking is in investors’ best interest.”
Neil Simon, vice president of governmental affairs at the Investment Adviser Association in Washington, notes that the SEC frames in its draft the fiduciary topic in terms of “’regulatory structures’ and ‘regulatory obligations’ rather than specifically referring to the question of whether the well-established fiduciary standard should apply.” Such use of language, he said, “could be read to suggest that the agency may be looking at other ‘harmonization’ issues rather than the fiduciary standard question.”
The SEC says that the draft plan surveys the forces shaping its environment and outlines more than 70 initiatives designed to support its primary strategic goals.
Kevin Carroll, managing director and associate general counsel for the Securities Industry and Financial Markets Association, said that SIFMA believes that the SEC “should perform all necessary cost/benefit analysis, but also proceed with all dispatch in establishing a uniform fiduciary standard under Dodd-Frank Section 913.”
Check out SEC to CCOs: Don’t Ignore These Issues on ThinkAdvisor.