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SEC’s White: Fiduciary Rule Important, but Dodd-Frank, JOBS Mandates Come First

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Securities and Exchange Commission Chairwoman Mary Jo White said Tuesday that she has asked the SEC to place a “high priority” on its fiduciary rulemaking options list, and that the regulator continues to give “serious consideration” to input received from stakeholders regarding a fiduciary rulemaking.

However, White said several times during her testimony before the Senate Banking Committee at a hearing titled “Wall Street Reform: Assessing and Enhancing the Financial Regulatory System,” that the SEC is “very focused on our mandated rulemakings under Dodd-Frank” and the Jumpstart Our Business Startups (JOBS) Act.

While White has said that the agency will make a “threshold decision” this year on whether, and how, to move forward with a uniform fiduciary standard rule for brokers and advisors, such a rule is not mandated by Dodd-Frank.

Said White in her Tuesday testimony: Section 913 of Dodd-Frank granted the Commission “broad authority” to impose a uniform standard of conduct for broker-dealers and investment advisors when providing personalized investment advice, and “the question of whether and, if so, how to use this authority is very important to investors and the Commission.”

White also said that Commission staffers continue to provide “regulatory expertise” to the Department of Labor as it considers potential changes to the definition of fiduciary under the Employee Retirement Income Security Act. “The staff and I are committed to continuing these conversations” with the DOL, White said. Labor has pushed release of its fiduciary redraft to January.

The SEC is focusing the “balance of this year” on completing rulemakings under Title VII of Dodd-Frank, which requires creating a framework for the regulation of swap markets, as well as rules regarding executive compensation, White told the lawmakers.

Indeed, Sen. Jack Reed, D-R.I., noted the 18 remaining rules that the agency must still complete under Dodd-Frank related to swaps and derivatives, and asked White if she could ensure the SEC rules in this area would be completed soon. White responded: “I can assure you of that. It’s a very high, major priority of mine to get these done.”

White noted in her prepared remarks that while the SEC has made “significant progress” in implementing mandated rules under Dodd-Frank and the JOBS Act, “more remains to be done … and we must continue our work with intensity.”

The Commission, White said, has proposed or adopted rules with respect to approximately 90% of all of the provisions of the Dodd-Frank Act that mandate Commission rulemaking. Sen. Mark Warner, D-Va., urged White during the hearing to press ahead with rules on equity crowdfunding under the JOBS Act. “While we may not get [equity crowdfunding] 100% right, we have to try and use that tool, sooner rather than later,” Warner said.

White said earlier this year that final implementation of crowdfunding rules was an SEC priority for 2014.

Other areas of concern raised by the senators included cybersecurity measures as well as the regulation of bitcoin.

The “SEC has to start thinking seriously about routine [cybersecurity] disclosure,” Reed said to White.

White noted the importance of cybersecurity threats and stated that the agency continues to review the filings of the companies under cybersecurity-related guidance the agency issued in 2011, and that she has formed a “cyber working group” within the agency.

Sen. Joe Manchin, D-W.Va., noted his “concern” with bitcoin, for which regulators have yet to issue regulations. He noted a bitcoin ETF that has been filed with the SEC but has yet to be approved by the agency.

White said that bitcoin is an “evolving area for all regulators,” noting that the SEC has taken action in a bitcoin-related Ponzi scheme and that the agency is “reviewing very carefully” the bitcoin ETF filing.

She added, however, that there is “not a planned rulemaking at the agency” around bitcoin because the agency “hasn’t concluded that bitcoin is a security.”

As to a uniform fiduciary rulemaking, White said in her prepared remarks that as part of its evaluation, the SEC staff “has been giving serious consideration” to the January 2011 staff study that the Commission submitted to Congress required by Section 913 of Dodd-Frank, as well as “the views of investors and other interested market participants, potential economic and market impacts, and the information we received in response to the request” for public feedback on a fiduciary rulemaking, which the agency issued last March.

Check out Roper Urges SEC Chief to Move on Fiduciary With Split Vote on ThinkAdvisor.


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