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July 18, 2012 at 08:30 AM
With the two-year anniversary of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21, industry officials are weighing in on the law’s progress and how the presidential election in November may affect the final shape of two areas of Dodd-Frank that, for advisors, remain unresolved: a fiduciary duty rule for brokers and a self-regulatory organization (SRO) to oversee advisors.
As of now, the Securities and Exchange Commission (SEC) has yet to propose a rule to put broker-dealers under a fiduciary duty when providing personalized investment advice to retail customers under Section 913 of Dodd-Frank. David Tittsworth, executive director of the Investment Adviser Association (IAA) in Washington, says that even if the SEC were to propose such a rule in the near future, it was “unlikely” that such a rulemaking will be finalized before the end of the year. What’s more, he says, “it is certainly possible that the fate of any such rulemaking may be affected by the results of the Nov. 6 election.”
The outcome of the election may also have a “significant effect” on if, when and how a fiduciary duty rule—as well as House Financial Services Committee Chairman Spencer Bachus’ bill to create an SRO for advisors—will be addressed, Tittsworth (right) says.
Rep. Maxine Waters, D-Calif., will introduce legislation to allow the SEC to collect user fees to fund advisor exams “in the near future,” Tittsworth says, “but it is unlikely that either approach [SRO or user fees] will be adopted this year.”
Of course, visible results of Dodd-Frank on the investment advisory community have been the “switching” of advisors with less than $100 million in assets under management from the SEC to the states, plus the required registration of private fund advisors with more than $150 million in AUM with the SEC.
Tittsworth said that as a result of the switch, the number of SEC-registered investment advisors has decreased from 12,000 to about 10,000. However, these advisors’ total collective AUM has increased to $48.6 trillion, he says. Other related regulatory requirements, Tittsworth says, including Form PF and the large-trader rule, “represent additional complexities for advisory firms that manage private funds.”
