Among the top Dodd-Frank Act rulemakings that the Securities and Exchange Commission will focus on in fiscal 2015 are evaluating recommendations from a staff report to consider a uniform fiduciary standard for investment advisors and broker-dealers as well as finding ways to harmonize rules for advisors and brokers, the agency said in its just-released financial report for fiscal 2014.
SEC Chairwoman Mary Jo White said Nov. 10 that she would provide more “clarity” as to her position on a uniform fiduciary rule in the “short term,” despite the fact that the agency has not yet decided “whether to do something or what to do” regarding such a rulemaking.
White declined to clarify to reporters at the Securities Industry and Financial Markets Association annual conference in New York how soon her opinions on a fiduciary rule would come, stating only that deciding whether to use the authority given to the SEC by the Dodd-Frank Act to put brokers under a fiduciary mandate is “an issue that I’ve been focused on since I arrived, and certainly in this last fiscal year.”
However, industry officials say that the two SEC divisions with primary responsibility for crafting a fiduciary rule, Investment Management and Trading and Markets, have “separately” submitted their recommendations to White regarding a fiduciary rulemaking, as well as their alternatives.
White told members of the Senate Banking Committee in September that she had 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.
White noted at the SIFMA event the “very diverse views” at the commission that have delayed decision making on such a rule. The “inquiry as to what to do” regarding such a rule “doesn’t end with saying, ‘Let’s have a uniform fiduciary duty,’” as there are “a lot of different things that can mean,” White said.
Added White: “Care needs to be taken to ensure we’re not harming investors by driving away service providers in the brokerage space.”
While White said that she’s “very committed” to a fiduciary rule and that it’s a “very high priority,” it’s a “quite complex issue,” particularly “in some people’s minds [as it pertains to] the ‘whether’ question, but certainly the ‘how-to’ question.”
Marilyn Mohrmann-Gillis, managing director of public policy for the Certified Financial Planner Board of Standards, told our sister site, ThinkAdvisor, that the SEC’s “commitment to consider a fiduciary rulemaking” next year hopefully “signals that after five years since Dodd-Frank, the Commission will propose and adopt a uniform fiduciary rule that, consistent with Dodd-Frank, is no less stringent than the standard currently in place under the [Investment] Advisers Act [of 1940].”
Also on the agency’s 2015 agenda will be to advance the remaining reviews, studies and reports required by the Dodd-Frank Act, including a review of the accredited investor definition.
The SEC plans to discuss on Thursday at its Washington headquarters whether changes are needed to the accredited investor definition during the agency’s Government-Business Forum on Small Business Capital Formation.
The agency also notes in its 2014 financial report that it will evaluate next year investment advisor and fund risk management practices, and “consider significant enhancements to the risk management practices of investment fund and advisors.”
The SEC also plans to focus on “liquidity risk management, stress testing, the use of derivatives, and transition planning.”
The SEC enforcement and examination divisions plan to scrutinize broker-dealers for churning and anti-money laundering compliance; sales and marketing practices where firms recommend proprietary products for retirement accounts; supervision of information technology systems; and order routing.
The enforcement division will also continue to focus on complex financial products, gatekeepers, financial reporting, market structure, private funds and insider trading.
Cipperman Compliance Services notes that advisors and BDs should expect that SEC staff “will conduct specialized sweeps in these areas and enhance review during routine exams.”