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Regulation and Compliance > Federal Regulation

SEC Seeks Public Comment, 'Greater Transparency' on Financial Re-regulation

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Less than a full week after President Obama signed historic financial re-regulation into law, the SEC announced several initiatives to make the study and rulemaking process “open” and “transparent.”

The SEC will address many concerns of investors as it fulfills its mission to provide the framework for “more stable financial markets that better protect investors and facilitate the capital formation on which our workers, investors, companies and economic growth rely,” SEC Chairman Mary L. Schapiro said in a speech on July 27.

On the same day, the Chairman announced an “Open Process for Regulatory Reform Rulemaking” and said it is Seeking Public Comments to Inform Study of Obligations of Broker-Dealers and Investment Advisers. The public has 30 days to comment on the Study. To send a comment by email, click here: [email protected], and include File Number 4-606 on the subject line.

The Committee for the Fiduciary Standard released a statement on July 28 praising Schapiro “for speaking out on extending the fiduciary standard, and its significance to maintaining public confidence and trust in our capital markets. Since her appointment by President Obama, Chairman Schapiro has repeatedly discussed the importance of linking personalized investment advice and fiduciary duty.” This editor is a member of the Committee.

The Committee stated that it is “concerned” that individual investors might get the idea that there was only this 30-day “opportunity to express their opinions on standards of care, and may have the effect of discouraging retail investor participation. This would be unfortunate. We believe this point should be clarified, and the opportunity for providing additional comment, in the event of rule-making after the study, made clear.”

“Based on Chairman Schapiro’s statements in support for extending the fiduciary standard to all professionals providing advice,” according to the Committee’s statement, it “expects the SEC to engage in further rule-making after it completes its study on standards of care.”

The SEC also announced it is Seeking Public Comments on SEC Regulatory Initiatives Required by Dodd-Frank Act. It has created online forms and email addresses–specifically for public comments–organized by topic, to enable anyone who wishes to comment to do so. Comments will be posted, unedited, under those topics–in fact there are a number of comments made on July 27 that are posted already.

Wall Street on Notice

In her speech, “Moving Forward: The Next Phase in Financial Regulatory Reform,” the Chairman put Wall Street on notice that the “regulatory process is not designed to re-debate issues that Congress has resolved.” The Commission, she said, typically “seeks public comments on its proposed rules. But, because of the significant rulemaking envisioned under the Act, we are expanding our process beyond what is legally required.”

Listening to Investors

Schapiro noted in the speech that that the SEC is hearing from–and listening to–investors large and small. These investors are concerned “about the about the confusing nature of their relationship with financial advisers,” and the “disadvantage” they are at “relative handful of sophisticated traders and market intermediaries with unfair access and built-in advantages.”

And, Chairman Schapiro added, “we also hear how investors are harmed by opacity and excessive complexity in over-the-counter derivatives and structured products,

subjected to hidden costs or to risks that were not clearly and fully explained.”

Speaking before the Chamber of Commerce, in Washington, DC, Schapiro said the goal “is to offer maximum opportunity for public comment and to provide greater transparency. We are inviting public comment even before the various rules are proposed and before the official comment periods have begun.”

So the Commission is inviting comment and acknowledging that, “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.”

Comments? Please send them to [email protected]. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.


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