Senate Reform Compromise Said to Be SEC Study With Fiduciary Authority at End

Senator Christopher Dodd (D-Connecticut) told House conferees in the late afternoon of Tuesday, June 22, that the Senate would present a counteroffer that day on whether to put brokers under a fiduciary standard of care. Conferees are scheduled to get back to work Wednesday afternoon, June 23.

Industry sources said they believed that the Senate counteroffer would be to retain the Senate language requiring the Securities and Exchange Commission (SEC) to study gaps in advisor and broker/dealer regulation, but at the end of the study the SEC would be given the authority to put brokers under a fiduciary standard of care. However, the caveat is that the SEC will be given the authority to write the fiduciary rules if the agency finds at the end of the study that the benefits of putting brokers under a fiduciary standard outweighs the potential litigation and compliance costs.

Dale Brown, president and CEO of the Financial Services Institute (FSI), says that the outcome on the fiduciary issue that the FSI has pursued “has been the standard of care and all of the issues surrounding harmonization be defined by the SEC.” That’s why the FSI endorsed the Senate language calling for the SEC study, he said, adding “the SEC study was the best path.”