September Surprise: Fiduciary Supporters Lobby the SEC

I’ve heard military service during wartime described as long periods of interminable boredom broken up by moments of sheer terror. At the risk of possibly overstating the case, it seems to me that the drawn-out debate over the SEC’s implementation of a fiduciary standard for brokers and “harmonizing” financial advisor regulation (as directed by Dodd-Frank’s Section 913) might well bear a similar description. 

Apparently, I’m not alone. Here’s what Knut Rostad, founder and president of the Institute for the Fiduciary Standard, recently wrote about the reasoning behind his newest agenda: “While the regulatory process seems never ending, the importance of current developments should not be overlooked. The fiduciary standard is at a crossroads in 2013. There is a new SEC. Three of the five commissioners have not expressed themselves, and the SEC is mulling revising the very meaning of advice. Concurrently, the DOL is preparing to re-propose modernizing what fiduciary means under ERISA… …The Institute for the Fiduciary Standard today announced its Fiduciary September initiatives, stressing the ‘enormous responsibility’ on the Securities & Exchange Commission (SEC) as it considers revising the meaning of [retail] ‘advice’ in federal securities law.” (See news story by Melanie Waddell on the Institute’s Fiduciary September plans, and Mr. Rostad’s latest blog for AdvisorOne on the current state of a fiduciary standard for all advice givers.)

It seems that “Fiduciary September” is more than just a recap of where we currently stand on the reregulation of brokers and advisors. With new leadership at the top of the SEC, lots of questions remain unanswered about the Commission’s allegedly pending new regulations. Judging by the SEC’s recent request for information on the implications of a fiduciary standard for brokers, many interested parties fear that at least the Commission’s staffers are leaning in a troubling direction (see my ThinkAdvisor blog from July 17: “Debunking Time”). 

But Rostad believes there’s still time to influence the SEC’s decision making: “While the direction of the new Commission leadership is uncertain and the DOL re-proposal is not yet submitted, the tactics and the tone of the industry’s opposition is well-known and deserve greater attention,” he wrote yesterday in his Think Advisor blog. “In effect, the industry has ‘surrounded’ the offices of regulators and members of Congress and declared war on fiduciary duties… …Fiduciary September includes events and actions aimed to highlight the importance of fiduciary principles in preserving trust and confidence in our capital markets.”