State securities regulators had a few pressing issues on their minds associated with the implementation of the Dodd-Frank Act as they convened their annual conference in Baltimore on Monday: how progress of “the switch” of advisors from federal to state regulation is going; what the potential of applying the fiduciary duty to brokers means for re-forming business models; and what the mid-term elections mean for advisors and the Dodd-Frank Act.
The North American Securities Administrators Association (NASAA), state regulators’ trade group, convened the three-day conference in Baltimore. NASAA and the Securities and Exchange Commission (SEC) have been working together to iron out details of the switch, which refers to the provision under Dodd-Frank requiring approximately 4,000 investment advisors with assets under management of less than $100 million to switch from federal to state regulation by July 21, 2011.
John Walsh, associate director of the SEC’s Office of Compliance Inspections and Examinations (OCIE), told NASAA attendees that the SEC and NASAA are working together “very well” on the switch details and that the SEC plans to have a proposed rule concerning the switch out between October and December.
“Before December, you should hear what the SEC’s plan is [regarding the switching of advisors], and you will be able to comment,” Walsh said. He directed attendees to the newly created section on the SEC’s website devoted to updates on the Dodd-Frank implementation progress. The SEC is already planning for how it will conduct exams after the switch occurs, Walsh added. For instance, he said the SEC wants to make sure that state examiners have all of the details about investment advisor exams the Commission conducted on specific firms, and what the SEC found. “We don’t want to create regulatory arbitrage,” he said.