A uniform fiduciary standard implemented by the Securities and Exchange Commission would cost brokers a total of $8 million in new compliance costs: $3 million to update their up-front disclosure documents and another $5 million for the initial build-out of compliance systems and training, according to the Securities Industry and Financial Markets Association.
But Ira Hammerman, SIFMA’s senior managing director and general counsel, said that BDs “are generally willing to incur” the above mentioned additional compliance costs “in order to arrive at a new fiduciary standard.”
In its comment letter to the SEC in response to the agency’s March 1 request for data on the costs and benefits of a fiduciary rule, SIFMA said that it surveyed 18 of its member firms—12 large BDs and six regional ones—to arrive at the $8 million in additional compliance costs under a fiduciary standard. SIFMA said that it focused on two specific areas where its members believe they would be hit hard by a fiduciary rule: the costs of developing and maintaining a disclosure form similar to Form ADV Part 2A, and the costs of developing and maintaining new supervisory systems, procedures and training programs to implement the new standard.
SIFMA noted in its comment letter that as the SEC has not issued a “concrete” fiduciary proposal yet, “it is not possible to adequately identify and estimate all the costs of establishing a uniform fiduciary standard.”
Charles Schwab, however, flipped the scenario around, telling the SEC in its comment letter what it would cost for registered investment advisors to comply with BD rules should the agency decide to include “harmonizing” BD and advisor rules in its fiduciary rule proposal.