SEC Budget Faces $108M Cut Under Sequester; House GOP Blasts SEC’s ‘Misplaced Priorities’

As stated in the 19-page document, House Republicans state that the SEC has been debating since 2011 whether to impose a fiduciary-like standard of care for broker-dealers, even though former SEC Commissioners Kathleen Casey and Troy Paredes said in January 2011 that the SEC staff had failed “to adequately justify its recommendation that the Commission embark on fundamentally changing the regulatory regime for broker-dealers and investment advisers.”

House Republicans also cite in the document comments made by SEC Commissioner Daniel Gallagher last October, in which he said that any rulemaking to change the broker-dealer regulatory regime, “[m]ust . . . be supported by Commission findings that such rules are necessary, as well as a detailed understanding and analysis of the economic consequences of such rules.”

Furthermore, the House Republicans stated that it’s been a year since the SEC said it would be issuing a request for data to help the agency more fully understand the potential costs associated with “altering the broker-dealer standard of care,” and to date no such request has been made. “In the absence of such economic and empirical data, the SEC should not proceed with this discretionary rulemaking,” the House Republicans said. However, Walter told members of the Senate Banking Committee in mid-February that the agency is “giving serious consideration” to its rule to put brokers under a fiduciary mandate, and that the agency will move forward soon with the request for public input on the costs and benefits of the rule.

But with Mary Jo White likely replacing Walter soon as the new chairwoman, progress on the fiduciary rule remains unclear. A Senate aide told AdvisorOne late Monday that the Senate Banking Committee is “tentatively” looking at the week of March 11 for a confirmation hearing with White, Obama’s choice as the next SEC chief.

Once the Senate Banking Committee has its hearing, the full Senate can confirm her the very next day, or a day later, so White could replace Walter by mid-March.

But as David Tittsworth told AdvisorOne in a recent interview, the question remains as to whether there are three votes to issue the request for public comment. “Those three votes could come from the current group of commissioners in the near future,” he said. “If the request is not issued before White takes over the chairmanship, there will be a bit of a time lag in order to allow her to come up to speed on this and many other pending issues.”