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The Practice Blog: A Focus on Dodd-Frank and Fiduciary at D.C. Gathering

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Some of the best legal, economic, and investing minds gathered in Washington on Thursday to talk about the aftershocks of the Dodd-Frank Act.

While one of the main takeaways was that the massive 2,300-page bill has left us with lots of uncertainty for quite some time to come, there was also consensus that now that the legislation has passed, the financial services industry must pay close attention to the regulatory process, and make sure they have an active voice in how those regulations are shaped.

“We don’t know how all of these rules will play out,” said Roel Campos, a former SEC Commissioner who’s now a partner at the law firm of Cooley Godward Kronish in Washington. “There will be a huge opportunity to send comment letters” to the respective regulators, he said, so don’t be “passive.” Indeed, Alan Avery, a partner with the law firm Arnold & Porter in Washington, said that the “scope and breadth of Dodd-Frank is daunting,” and while 25% of financial services reform was completed with the passage of Dodd-Frank, now 75% of the remainder has been left to the rulemaking process. “That’s why it’s important to get involved” in the comment process, Avery said.

Top thinkers like Campos and Avery gathered at the first annual Washington Investment and Regulation Conference, which was jointly sponsored by the Global Interdependence Center and the CFA Institute.

The fiduciary duty debate was, not surprisingly, a point of discussion. One of the important questions in the debate of fiduciary versus suitability, said Jim Angel, a professor at Georgetown University who specializes in the structure and regulation of financial markets, is “What is the nature of the product that you’re selling?” Angel was supportive of a fiduciary duty for brokers, and he went on to say that “the disclosure of the nature of the relationship [between the advisor and the client] is essential, and the relationship should determine the standard” the advisor/broker adheres to. Campos told me after his public remarks that he believes the SEC will put brokers under a fiduciary standard.

Alex Pollock, a resident fellow at the American Enterprise Institute (AEI) in Washington, pointed to what he said is a major “loophole” in Dodd-Frank–the reforming of Fannie Mae and Freddie Mac is not addressed in the legislation.

Michael Farr, president of the law firm Farr, Miller & Washington in Washington, echoed the same exasperation that we’ve heard many times since Dodd-Frank’s passage: What consequences will we see from so many rules that have yet to be written? Farr also predicted that the Consumer Financial Protection Bureau’s (CFPB) ultimate mandate to require “a much higher standard to borrow” will not help the economy, and that the housing market has further to fall. But regulatory reform, he opined, will have a positive affect on banks over the long term.


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