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July 22, 2013 at 11:16 AM
Advisors told ThinkAdvisor that their hopes are fading that the Securities and Exchange Commission will release a fiduciary rule proposal during the law’s third year of life, which was ushered in on Sunday.
“I’m becoming progressively more pessimistic, although there has been no action as of yet” by the SEC on a fiduciary rule, says Harold Evensky (right), president of Evensky & Katz Wealth Management.
However, Marcus Stanley, policy director for Americans for Financial Reform, told ThinkAdvisor on the sidelines of the Cato Institute’s event in Washington Monday titled Dodd Frank’s Third Anniversary: Has It All Been Worth It?, that large institutional asset managers like Blackrock and PIMCO should be targets by the Financial Stability Oversight Council—which was created by Dodd-Frank—to be considered as systemically important financial institutions (SIFIs).
Whether an institutional asset manager or a hedge fund will be the next SIFI designee “is a really important question,” Stanley told ThinkAdvisor, as “so far what the FSOC has done is designate those [firms that are] completely obvious as they were central to the system.”
FSOC, Stanley said, is “just only now saying GE Capital and AIG” are significant. Firms like “BlackRock and PIMCO,” he said, are two of the big institutional asset managers where “there needs to be a more serious examination” taking place as to whether they are systemically important.
MetLife was also recently put under review by FSOC to be considered to be a nonbank SIFI. But James Donnellan, VP of government relations at MetLife, noted at the Cato event that while “AIG is welcoming being a SIFI, MetLife is not.” Said Donnellan: “We don’t believe the insurance industry caused the [financial] crisis.”
Dodd-Frank gave the SEC the authority to create a fiduciary standard for brokers. However, the law didn’t mandate that the SEC write such a rule. Where fiduciary duty stands among the SEC’s priorities remains questionable, as the agency still has nearly 100 mandated rules to pass.
Given that the SEC has to digest new data after the July 5 close of its comment period on the costs and benefits of a fiduciary rule, as well as two new commissioners likely to take their seats at the SEC soon, industry officials predict any rule proposal from the SEC won’t come until year-end, at the earliest, with more likely bets placed on a release next year.
