Less than a month apart, the women behind the crafting of fiduciary rulemakings at the Department of Labor and the Securities and Exchange Commission made some definitive comments about their respective proposals.
In late February, SEC Chairwoman Mary Jo White set 2014 as the year the fate of a uniform fiduciary standard rulemaking for brokers and advisors would be decided by stating the agency would make a “threshold decision on whether to proceed in adopting a uniform fiduciary standard rule” for broker-dealers and investment advisors.
Once that’s been agreed upon, she said, the agency would then decide whether there should be “harmonization” of BD and advisor rules.
In mid-March, Phyllis Borzi, assistant secretary of labor for DOL’s Employee Benefits Security Administration, stated that moving forward in releasing EBSA’s redraft of a rule to amend the definition of fiduciary under ERISA is DOL’s “No. 1 priority.”
Labor Secretary Thomas Perez stated in mid-March that a redraft would be arriving “in the coming months.” DOL’s regulatory agenda cites August as the arbitrary release date, but Borzi said at a Financial Services Roundtable (FSR) event in Washington held in mid-March that it could be sooner or later than that.
While a fiduciary redraft from the DOL seems to be on track, comments made by SEC Commissioner Daniel Gallagher at the FSR event signal that the SEC may not issue a proposed rule at all.
“I’m not sure a majority of the commission believes we need to use” the authority under Section 913 of Dodd-Frank, Gallagher said.
SEC: ‘Authority, Not a Mandate’
While Commissioner Gallagher noted that the SEC, like DOL, is being “deliberative” in assessing a fiduciary rulemaking, he also reiterated the point that the SEC has “the authority, but not a mandate” to issue such a proposal.
The economic analysis that the agency is currently conducting on such a fiduciary rule, he continued, “will help us to determine whether we need” to move forward.
But there’s talk among industry insiders that if the economic analysis does prove strong enough to push the SEC forward in its rulemaking, Congress could step in with new legislation calling for enhanced economic analysis requirements for the SEC before it proceeds.
Washington insiders say that the commission is currently split—two commissioners want to move forward with the authority under Dodd-Frank while two are opposed and only want to enhance disclosures. White is the crucial third vote that’s needed to move a proposal forward, but she has remained tight-lipped on where she stands on the issue.
Gallagher told me after his speech in late February at the SEC Speaks event that the agency “has more pressing issues to deal with” than a fiduciary rule.
Indeed, former SEC Chairman Harvey Pitt told me in an email message that he believes “the most influential factor” in determining SEC action on a fiduciary proposal “will be the other things” on the commission’s agenda. “There are still a great many rules waiting to be adopted, and Mary Jo has a huge backlog of things to attend to.”
The ‘Courage to Stand Up to Wall St.?’
Ron Rhoades, president of ScholarFi Inc., a fee-only wealth advisory firm, is hoping White “has the courage to stand up to Wall Street” and isn’t “just another in a long string of SEC chairpersons who have taken their marching orders from Wall Street’s oligarchy.”
Said Rhoades: “If I had to place my bet, I would have to, at this time, ‘follow the money.’ Wall Street and the insurance companies are pouring many, many millions of dollars into Washington, D.C., this year to stop the DOL and the SEC from moving ahead with regulatory extension of the fiduciary standard of conduct.”