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September 20, 2011 at 06:07 AM
It’s been a big week for news on the advisory reregulation front—and most of it is bad. First, in her testimony before the House Financial Services Committee last Wednesday, SEC Chairman Mary Schapiro announced her support for an investment advisor SRO, as described in Committee Chairman Spencer Bachus’ draft legislation called the “Investment Adviser Oversight Act of 2011.” In response to her remarks, Chairman Bachus, R-Ala., hinted at a potential about-face on additional funding for the SEC, stating that his Committee’s reluctance to increase the Commission’s budget had been based on restructuring the SEC, presumably such as the handing off of RIA regulation that Ms. Schapiro appeared be suggesting. I realize that Santa Fe is a long way from the Beltway, but from out here, that conversation sure looks a lot like a deal in the making—one that would make an RIA SRO a whole lot more likely.
Then, Monday, media reports (specifically, Investment News’ Mark Schoeff Jr.) were circulating that a high-ranking SEC staffer revealed that new regs applying a fiduciary standard for brokers is extremely unlikely to come out this year, due to Congress’s mandate that the Commission more thoroughly study the costs vs. benefits of changing current broker regulations. With the political uncertainty in Washington these days, that puts a new broker standard on a very shaky back burner, which leaves the very real possibility that RIAs may end up with “harmonized” regulations, but no level playing field as a quid pro quo.
And finally, the worst news of the lot come out Monday, when the Department of Labor announced that amid tremendous Congressional and industry pressure to reconsider vaguely articulated—but allegedly “dire”—consequences of expanding consumer protections under ERISA, Phyllis Borzi at the Employee Benefit Security Administration announced that the DOL was reconsidering its new regulations, which among other things would expand the fiduciary duty under ERISA to cover IRA accounts. This is particularly bad news for proponents of a broker fiduciary standard, as the EBSA’s proposed regs were seen as a test case of Washington’s political will to resist the influence of the financial services industry, and enact stiffer investor protections.
