The Women Leading the Fiduciary Charge

Phyllis Borzi and Mary Jo White are two tough ladies with two tough jobs.

Both are regulators responsible for crafting two contentious fiduciary rules—rules that advisors and broker-dealers say could fundamentally alter the way they do business.

Despite severe pushback, Borzi, assistant secretary of Labor for the Employee Benefits Security Administration, has been adamant for years that she’s determined to get a rule passed that amends the definition of fiduciary under the Employee Retirement Income Security Act.

While relatively new to her job, Securities and Exchange Commission Chairwoman Mary Jo White is now responsible for trying to do what her predecessor couldn’t: get the Commission to pass a rule to put brokers under a fiduciary mandate.

White told members of the Senate Banking Committee in late July that the SEC was “focused” on completing a fiduciary duty rule proposal and that it was “important” for her “to get to wherever we are going on that [rulemaking] as quickly as we can.” Getting a rule proposal out this year, however, is unlikely, as the agency has new cost/benefit data to digest, and two new SEC commissioners recently came on board.

But former SEC Chairman Harvey Pitt believes White, whom he calls “incredibly bright, very able” and someone who knows how “to bring order out of chaos,” will use her natural ability to lead to help resolve the many contentious issues that surround the adoption of a fiduciary standards rule. White will “consider the issues from all sides and work to develop a consensus that achieves the Commission’s policy objectives while taking account of reasonable industry concerns.”

EBSA’s regulatory agenda had said the DOL’s fiduciary reproposed rule would come out in October. However, Borzi said in mid-September that EBSA would miss that deadline because EBSA was “not finished” with the revamped rule that it pulled.

“The point of working on the reproposal is to get it right,” Borzi told attendees at the Financial Services Institute’s Advisor Summit, held in Washington in mid-September. “We are trying very hard to make sure we’ve crossed all the T’s and dotted all the I’s. We shared many of the concerns that people have raised in the public comment process, and we want to make sure we’ve given it our best shot.”

Fred Reish, partner and chairman of the financial services ERISA team at Drinker Biddle & Reath, says that Borzi has “been an activist assistant secretary.” Her administration has brought “a period of great change,” Reish says, “coming after years of moderate assistant secretaries who made measured steps forward.”

While “we don’t know where the fiduciary advice proposal will end up and what the long term impact will be,” Reish adds, “based on public comments, Phyllis clearly believes that plan consultants and advisors have many conflicts of interest and, at least sometimes, succumb to those conflicts. The anticipated fiduciary proposal will almost certainly reflect those concerns.”

But DOL’s fiduciary reproposal could also be held up once it gets to the Office of Management and Budget.