SEC Will Pursue Fiduciary Rule in 2013

The Securities and Exchange Commission plans to “move forward” next year with a uniform fiduciary standard rule for advisors and brokers when providing personalized investment advice as well as “continue to assess” ways to better harmonize advisor and BD rules when they are providing similar services, according to the agency’s just-released 2012 Financial Report.  

The agency will forge ahead with a fiduciary rule in 2013 even with a new chairman at the helm, SEC Commissioner Elisse Walter, who will fill in for Mary Schapiro until a permanent chairman is named. While Walter, a Democrat, has sided with current SEC chairwoman Schapiro as well as the other Democratic Commissioner, Luis Aguilar, in “vigorously” advocating “that all investors should receive equal protection under the law from a uniform fiduciary standard,” she likely wouldn’t go along with putting brokers under the Investment Adviser Act fiduciary standard. However, Walter has been a strong proponent of harmonizing advisor and BD rules.

Schapiro told AdvisorOne in late September that the agency was indeed moving forward with a rule proposal internally, and that she was “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. She said at the time that “it would be nice to get this final request for information,” however, such a comment request has yet to be issued by the agency.

David Tittsworth, executive director of the Investment Adviser Association in Washington, says the question now is whether soon-to-be Chairman Walter “has two other votes to support the request for public comment, ” as the two Repulican Commissioners Troy Paredes and Daniel Gallagher “ have expressed reservations about a fiduciary rulemaking in the absence of appropriate cost-benefit information and analysis.” Thus, Tittsworth says, “Chairman Walter would have to address their cost-benefit concerns in order to move forward with a request for comments and, ultimately, a rulemaking on fiduciary standards.”

Barbara Roper, director of investor protection for the Consumer Federation of America, agrees, noting that while it’s “encouraging” that further efforts on a fiduciary rule are on the agency’s agenda, “unless the Republican [commissioners] are prepared to drop their opposition,” to a fiduciary rule “it’s going to take a third Democratic vote to finalize a rule.”

Indeed, there was disagreement among the SEC Commissioners this year on “which questions to even ask in a preliminary cost-analysis review to submit for public comment prior to agreeing on an actual proposal,” adds Duane Thompson, senior policy analyst at fi360. “Complicating things even more is the likelihood of a 2-2 deadlock on many issues before the Commission, including the fiduciary study, at least until a nomination is submitted by the Obama Administration to fill the open Commission slot” after Schapiro resigns.