Podcast Center
Video Center
Webcasts
Resource Center
Events
September 25, 2012 at 08:00 PM
A fiduciary rule from the Securities and Exchange Commission (SEC) looks to be years away. Three to four years away is the prediction Knut Rostad, president of the Institute for the Fiduciary Standard, recently gave me. During that time period, he said, “we aren’t going to see any fiduciary rule with teeth.”
While industry observers have been adamant that the SEC’s fiduciary process has stalled, SEC Chairwoman Mary Schapiro told me in a mid-September interview that while “it may appear from the outside it has stalled, work has been going on here [at the agency] to advance the issue.”
Schapiro said that the fiduciary issue remains “really important,” and that she’s “ready to go” on releasing a request for information to allow the public to help inform a “more detailed” cost-benefit analysis on the agency’s fiduciary rule. Declining to say whether a rule proposal would come by year-end, Schapiro said “it would be nice to get this final request for information.”
Still, industry experts like Neil Simon, vice president of the Investment Adviser Association (IAA) in Washington, argue the SEC is “nowhere close” to voting on a fiduciary rule proposal.
Barbara Roper, director of investor protection at the Consumer Federation of America (CFA), added on a recent conference call that pressure from Congress to perform that more detailed cost-benefit analysis has basically “paralyzed” the agency.
Roper (left) also believes that Schapiro is taking it slow in proposing a rule for fear of litigation. “Because of the threat of litigation, [Schapiro] is now reluctant to move forward” on a fiduciary proposal without support from a Republican commissioner, Roper said.
What’s more, the SEC is faced with mandatory rulemakings under the Dodd-Frank Act and, more recently, the JOBS Act, so the SEC will “prioritize” its rulemakings. Dodd-Frank only gave the agency the authority to write a fiduciary rule; it didn’t mandate one.
Yet another factor is that Schapiro could likely be departing her post at the end of this year. Rostad and David Tittsworth, executive director of IAA in Washington, say the word on the street is that it’s unlikely that Schapiro will continue as chairwoman after this year, even if President Obama is re-elected.
While it’s certainly not unusual to see a “fair amount” of turnover at federal agencies in the wake of a presidential election, Tittsworth says that if Mitt Romney wins the White House, it’s widely expected that he will appoint a replacement for Schapiro.
“Significant changes in the composition of the Commission” could well occur after the elections, Tittsworth said, “and those changes may very well determine the fate of the Section 913 [fiduciary] rulemaking.”
Rostad did say there was a “small chance” that Schapiro would issue a fiduciary rule proposal by year-end. He attempted to reignite the stalled fiduciary process by christening September as “Fiduciary September,” and he, along with heavyweights like Vanguard founder John Bogle and former SEC Chairman Arthur Levitt, planned to meet with Schapiro in mid-September to try to press her to move forward with a rule. However, industry experts predicted those efforts would prove futile.
Rostad (right) argued that SIFMA’s approach to a fiduciary standard “is a sales/broker standard and not a fiduciary standard at all.” But Roper countered that “the best chance” to get the SEC moving again on a fiduciary rulemaking is to focus on areas where SIFMA and the advisory industry agree regarding how the SEC should craft a fiduciary duty for brokers.