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Regulation and Compliance > Federal Regulation > SEC

Washington Watch: Industry Heeds SEC's Call for Comments

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The advisory industry is wasting little time in telling the Securities and Exchange Commission (SEC) how it should proceed on crafting a fiduciary duty for brokers after the securities regulator recently ushered in a new process allowing public comments before it even proposes its rules. Since opening its comment period in late July on whether brokers should be put under a fiduciary standard, the SEC at press time in mid-August had received more than 1,000 comments.

Industry trade groups plan to co-sponsor a “fiduciary standard forum” in Washington later this month in which luminaries from academia and policy research experts will be able to voice their opinions on how a fiduciary standard would affect brokers. The joint forum, to be held on September 24, will be sponsored by the Committee for the Fiduciary Standard along with the Certified Financial Planner Board of Standards (CFP Board), Financial Planning Association (FPA), Financial Services Institute (FSI), and the National Association of Personal Financial Advisors (NAPFA). Professors Tamar Frankel from Boston University and Arthur Laby of Rutgers University are among those who will be invited to speak.

Knut Rostad, chairman of the Committee for the Fiduciary Standard, says that “As the first major review with prospective rulemaking on the duties of brokers and advisors in 70 years, and on the heels of the financial crisis, to say that the SEC’s work here is vital to investors is an understatement.”

The jointly sponsored forum in Washington is a follow-up to a joint “call for papers” on how a fiduciary standard would apply to brokers that was issued by The Committee for the Fiduciary Standard and the editors of the Boston University Review of Banking & Financial Law in July. Both groups invited scholars, researchers, practitioners, and professionals to pen papers by August 31 that addressed “the purpose of fiduciary standards and the manner of application to RIA and/or B/D activities, as well as address the other issues posed by Congress” in the Dodd-Frank Act in connection with the six-month study the SEC will conduct. The Committee for the Fiduciary Standard will decide which papers will “provide substantial assistance to the SEC (regardless of the point of view expressed),” and submit them to the SEC in early September.

Comments Welcome by E-mail, Web

SEC Chairman Mary Schapiro says the agency “is going well beyond what is legally required” in allowing comments before rulemakings are proposed. The agency has set up a series of e-mail links on its website which are organized by topic and are listed starting with rules that have the shortest time frame for implementation.

To little surprise, insurance industry reps are telling the SEC in their comments that a fiduciary standard for them would result in higher costs for consumers. As one insurance rep writes: “… I give my lower and middle income client’s full service with no fees and always watch out for their best interests. New [fiduciary regulation] will only make me charge fees and increase costs to consumers.”

But independent advisors are urging the SEC to move forward with a fiduciary standard for brokers and insurance agents. “The authentic fiduciary standard, as currently defined in the 1940 Advisors Act, is the standard that is in the best interest of investors and should be preserved,” writes Andrew Cosgrove, director of investments at Bluestone Financial Advisors. “This is the ‘bright line’ standard that should be heavily communicated to the investor community so that it is clear that anyone who provides advice as to the selection of any investment must put the client’s interest ahead of their own and disclose all conflicts in advance.”


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