Despite the advisory industry’s hopes that the Securities and Exchange Commission (SEC) would get a quick start on writing a rule to put brokers under the same fiduciary standard as advisors, it looks as though a rulemaking could come by summer.
An SEC spokesperson told me in early February that the SEC staff has “penciled-in the April-through-July time period” for recommending a fiduciary standard proposal for the Commission’s consideration. “The [SEC] staff is working through the details of a rule and that will take some time,” the spokesperson said.
SEC Chairman Mary Schapiro said in comments at a recent conference in Washington that the SEC has a lot of work ahead of it before it can start writing a fiduciary rule. The agency still has more than two dozen Dodd-Frank rules and studies on its “tentative work plan” before it can begin crafting a fiduciary rulemaking, the SEC spokesperson told me.
Schapiro did make clear in her comments during her speech in early February, however, that the SEC would “begin to consider rules” this year stemming from its recent study on Section 913 of Dodd-Frank, which recommended that financial professionals who provide personalized investment advice about securities adhere to a fiduciary standard of conduct “no less stringent” than that imposed on investment advisors.
The SEC is feeling the weight of implementing the scores of rules and studies mandated under Dodd-Frank. Republican SEC Commissioner Kathleen Casey said in a recent speech that the Sarbanes-Oxley Act of 2002 almost seems “quaint” compared to Dodd-Frank, which is “more than 10 times longer and mandates more than 10 times the rulemakings and studies.” The volume of rulemakings and studies under Dodd-Frank, “coupled with the speed at which Congress expects it to occur,” most within one year, “poses significant challenges to the agency,” Casey said. “The real threat” of such a tight deadline and so many rules and studies to conduct is that the SEC may not be able “to fully consider the rules we are adopting,” Casey said, and that the relatively short public comment periods imposed in an effort to comply with Dodd-Frank deadlines may “undermine their very function of supporting and strengthening the confidence we have in the likely effects of our rules.”