There can be no doubt the final agreement between House-Senate conferees regarding the fiduciary standard is a decisive victory for investors. Against a massive lobbying effort spearheaded by some of the country’s most influential insurance groups, House conferees won major points in the final agreement.
After a six-month study (originally it was 18-months), the SEC will have authority to develop rules “with respect to a broker or a dealer,” regarding a standard of conduct that is the “same as the standard of conduct applicable to an investment adviser under Section 211 of the Investment Advisers Act of 1940.” Further, the SEC is directed to “facilitate the provision of simple and clear disclosures” and to “examine and where appropriate, promulgate rules prohibiting or restricting certain sales practices, conflicts of interest.”
This is no Disney movie. There are significant carve-outs and limitations in the legislative language; SEC rulemaking is permitted, not required. There is no definitive timeline rulemaking must follow. This process can be messy and long. The campaign to make fiduciary advice accessible to all investors is hardly over.
While the awareness of and support for the fiduciary standard has likely grown in the past two years, it is not at all clear that groups with long records of adamant opposition have suddenly experienced a material change of heart. Simply because Chairman Frank and subcommittee Chair Kanjorski managed to pull out a clear win in this skirmish–with some key help from both the Obama Administration and Goldman Sachs executives–it hardly means that Wall Street firms will necessarily be starting study groups to examine John Bogle’s “Fiduciary Society.”
Let’s not forget how very quickly SIFMA’s position evolved from advocating for the two-tiered, fiduciary/suitability standards, to advocating for the “universal” standard, to today advocating for a new federal fiduciary standard it says is “more pro-investor than any other alternative we have heard advanced.” (This, by the way, is the same “pro-investor” standard, according to a SIFMA spokesperson, that does necessarily not require, within the broker business model, that all fees, expenses, and compensation be disclosed.)