It’s time for the Securities and Exchange Commission to move on a “best-interest” fiduciary standard, and despite split views at the Commission on such a rule, SEC Chairwoman Mary Jo White can move it forward, Richard Ketchum, chairman and CEO of the Financial Industry Regulatory Authority, said Monday.
It “would be far preferable to have a single, consistent [fiduciary] standard that operates out of the SEC across all [investment] vehicles that exist for the individual investor,” Ketchum said Monday morning during a question-and-answer session with Ira Hammerman, the Securities Industry and Financial Markets Association’s executive vice president and general counsel, at SIFMA’s Compliance and Legal Seminar in Phoenix.
Hammerman queried Ketchum on how White could “wrestle” a uniform fiduciary rulemaking to a resolution, given the polarizing views about such a rule among the SEC commissioners. “Nothing hard is easy; nothing worth doing is easy,” Ketchum responded, adding that while he has “tremendous respect” for the “range of concerns” expressed by some SEC commissioners regarding a fiduciary rule for brokers, he has “great confidence” in White being able “to move this [rulemaking] forward.”
Said Ketchum: “I’m confident that each of the commissioners recognizes the importance of the SEC playing a central role in defining a best interest of the customer standard for the industry.”
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Ketchum said during the Q&A that “if there’s an impression in America that undisclosed backdoor payments are the driver of what goes on in the securities industry, that impression is false. Those payments would be illegal.” He was referring to comments made by President Barack Obama in a Feb. 23 speech at AARP endorsing the Department of Labor’s redraft of its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act.
Any best interest standard, he continued, has to recognize that “significant change” needs to occur regarding disclosure and fees, and that that information should come “up front,” suggesting that BDs should have to disclose such information to clients in a format similar to the Form ADV that advisors give to their clients.
In a separate interview with ThinkAdvisor, Ketchum said he had “tremendous respect” for White. “It does seem to me that this is the right time to move to a consistent, single standard that is focused on the best interest of the customer, and I’m confident that she’s [White] the right person to lead us there.”
White is set to speak Tuesday at the SIFMA event in a Q&A with SIFMA president and CEO Ken Bentsen.
Hammerman told Ketchum it would be a “good idea” for FINRA to enter the fiduciary debate by sending a comment letter to DOL.
“We certainly would like to be part of the discussion,” Ketchum responded.