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Dodd-Frank: SEC Issues Call for Comments

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The U.S. Securities and Exchange (SEC) has set up a Dodd-Frank Wall Street Reform and Consumer Protection Act comment submission process.

The SEC has posted a list of Dodd-Frank act comment submission form links, and it also has posted a separate request for comment on the standard of care that brokers, dealers and investment advisors should use.

The submission form list includes separate Web forms for many different Dodd-Frank act sections, including the family office provision in Title IV, and the Office of the Investor Advocate, credit rating rating agency review and investment advisor examinations study provisions in Title IX. The rules with the tightest implementation schedules are at the top of the list, officials say. Commenters can use the same list to submit comments through e-mail, and they also can submit comments through traditional mail.

The standard-of-care request for comment relates to a study to evaluate: the effectiveness of existing standards of care advisors and broker-dealers use “when providing personalized investment advice and recommendations about securities to retail investors; and whether there are gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to the standards of care for these intermediaries,” officials say.

Traditionally, advisors have used a fiduciary standard, which requires them to put clients’ interests ahead of their own, and broker-dealers — including life insurance agents affiliated with broker-dealers — have used a suitability standard, which requires them to verify that the products sold to consumers meet the needs of those consumers.

In the request for comment, the SEC asks commenters to describe specific instances in which “the regulation and oversight of investment [advisors] provide greater protection to retail customers than the regulation and oversight of brokers and dealers; and the regulation and oversight of brokers and dealers provide greater protection to retail customers than the regulation and oversight of investment [advisors].”

The SEC also asks commenters to discuss “the existing legal or regulatory standards of state securities regulators and other regulators intended to protect retail customers” and the impact of subjecting brokers and dealers to the Investment Advisers Act of 1940 on brokers, dealers and affiliated persons.

Comments on the fiduciary standard issue will be due 30 days after the request appears in the Federal Register.

The SEC plans to hold public hearings on selected topics, officials say.

President Obama signed H.R. 4173, the bill that created the Dodd-Frank act, Wednesday. Agencies usually wait until they draft regulations to ask for comments, but the SEC says it is giving the public a chance to comment while drafting is under way because of the significance of the rulemaking envisioned.

The SEC has come up with detailed rules for in-person encounters. Staffers will “try to meet with any interested parties seeking a meeting,” officials say.

“When the number of requests exceeds availability, the staff will seek out parties with varying viewpoints,” officials say. “Staff may have to limit the number of meetings with similarly situated parties and will limit multiple meetings with the same party…. Staff will ask those who request meetings to provide, prior to the meeting, an agenda of intended topics for discussion. After the meeting, the agenda will become part of the public record. Meeting participants will be encouraged to submit written comments to the public file, so that all interested parties have the opportunity to review and consider the views expressed.”

One question has been whether federal agencies will use DFWSRCPA, WSRCPA, WSR, or some other acronym to refer to the act. The SEC did not use an acronym when referring to the act in the documents that came out today.

Schapiro talked about the comment process today in Washington, at a meeting organized by an arm of the U.S. Chamber of Commerce.

“The regulatory process is not designed to re-debate issues that Congress has resolved,” Schapiro said, according to a written version of her remarks provided by the SEC. “Rather, investors, leaders of small and large businesses, academics and others who identify issues, and who offer ideas and alternatives, can help us create a regulatory structure that supports our shared goals over the long term.”

Schapiro also talked about the fiduciary care


“As it stands now, investors who turn to a financial professional often do not realize there’s a difference between a broker and an advisor–and that the investor can be treated differently based on who they’re getting their investment advice from,” Schapiro said. “At the completion of this study, we will have the authority to write rules that would create a unif

orm standard of conduct for professionals who provide personalized investment advice to retail customers. And, the new law requires that this standard be ‘no less stringent’ than the standard applicable to investment advisors. I have advocated such a uniform fiduciary standard, and I am pleased the legislation provides us with the rulemaking authority necessary to implement it.”

The SEC wants to get comments that “recognize the primary and central importance of investor protection, but offer suggestions on implementing fair and flexible regulation,” to help staffers write rules that “increase investor confidence while preserving brokers’ ability to offer a full spectrum of services,” Schapiro said.

A representative for the National Association of Insurance and Financial Advisors, Falls Church, Va., says the group is still reviewing its commenting options.

Barbara Roper, investor protection director at the Consumer Federation of America, Washington, says she is happy to see the set seeking public input as they fashion rule proposals.

“Members of industry have always found a way to participate in the process at this early stage, but investors have not had that same degree of access,” Roper says. “Members of the investing public can’t begin to match the resources and expertise that industry is able to bring to bear, but the SEC has gone out of its way to invite public participation and to eliminate, as much as possible, the barriers that might otherwise prevent participation by members of the public.”

Simply centralizing the comment requests and organizing them by category makes the process more user-friendly, Roper says.


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