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June 01, 2011 at 08:00 PM
Mary Schapiro, chairman of the Securities and Exchange Commission (SEC), said in early May that the agency will turn its attention to addressing a fiduciary duty rule for brokers, and harmonization of advisor and broker rules, as well as revisions to mutual fund distribution fees under Rule 12b-1 after July 21, the one-year anniversary of the Dodd-Frank Act.
Schapiro, speaking at the Investment Company Institute’s (ICI) annual conference in Washington, said that the SEC will focus on regulatory changes concerning mutual funds, particularly 12b-1 fee reform, “in tandem” with the investment advisor/broker-dealer reform issues.
The SEC received more than 2,400 comments on its proposed revisions to Rule 12b-1, which Schapiro said raised “some important issues regarding 401(k) plans, disclosure issues, and creating competitive pricing that benefits investors.”
After July 21, Schapiro said, the agency will “put together a rulemaking team” to craft a rule for putting brokers under the same fiduciary standard as advisors. “We continue to seek comment” on both a fiduciary duty rule for brokers as well as harmonization, Schapiro said, adding that she has also asked SEC economists to analyze available economic data regarding fiduciary duty to help inform the rulemaking. Some lawmakers have called for a cost-benefit analysis before any fiduciary rule is promulgated. While the SEC, she said, is focused on putting “in place a fiduciary duty [for brokers] that is no less stringent” than the duty under the Investment Adviser Act, she stressed that any rule must “not limit investor choice.”
As for a self-regulatory organization (SRO) for advisors, which the SEC was required to study under Section 914 of Dodd-Frank, Schapiro said that while the Commission continues to explore the SRO issue, all three options put forth in the SEC’s study to Congress—one or more SROs, extension of FINRA oversight over advisors, or imposing user fees to fund advisor exams—would require legislation to “move forward.”
Schapiro told a Senate Appropriations Subcommittee in late April that the agency would use the recent $74 million funding boost that it received under the FY 2011 continuing resolution to fill vacancies to meet “key strategic needs, perform tasks required by the Dodd-Frank Act, and continue to improve agency operations.”
The funding boost, Schapiro told the Subcommittee on Financial Services and General Government, which is chaired by Sen. Dick Durbin, D-Ill., will allow the SEC to address staffing needs, particularly within the Division of Trading and Markets, Division of Enforcement, and Office of Compliance Inspections and Examinations (OCIE). Schapiro said the agency will use the funds to revitalize core programs like enforcement and inspections activities, as well as addressing new responsibilities such as enhancing oversight of credit rating agencies and adding staff that has expertise in “critical areas,” such as derivatives.
In the last five months of FY 2011, Schapiro said that the SEC will also use some of the additional funds to modernize and enhance the agency’s outdated technology. “We will be making key investments in general IT infrastructure modernization, including refreshing old technology and system hardware and software,” Schapiro said.
