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SEC Chief White: Fiduciary Rulemaking Just Getting Started

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Securities and Exchange Commission Chairwoman Mary Jo White told lawmakers Tuesday that the agency is “at the beginning” of its fiduciary rulemaking process and that the Department of Labor is likely to “proceed” with its fiduciary redraft under the Employee Retirement Income Security Act.

White, during her comments at a hearing held by the House Financial Services Committee titled “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request,” also said that even while SEC staff will also be developing a rule proposal to require third-party exams for advisors, third-party exams are “not an optimal place to go.”

During the more than three-hour long hearing, White received numerous questions about her announcement on March 17 that she supports the agency moving forward with a uniform fiduciary rule for brokers and investment advisors, one that’s “codified, principles-based and rooted in the current fiduciary standard for investment advisors.”

White was asked by Rep. Ann Wagner, R-Mo., as well as Rep. Frank Guinta, R-N.H., why the “quick turnaround” in her remarks made a month earlier at the Practising Law Institute’s SEC Speaks conference in Washington that the agency had not yet decided “whether” to move on a fiduciary rulemaking, to her announcing March 17 that the agency “should act” on one.

“This seems like a quick turnaround,” Wagner said to White. “What changed?”

White responded: “This isn’t an abrupt event. What I have done is reached my own personal decision to move ahead,” on such a rulemaking, adding there are “lots of challenges to that.” The “next steps are to discuss in detail all aspects of this [rulemaking] with the [SEC] commissioners.”

White cited numerous times during the hearing that before she was confirmed as SEC chairwoman that she “was concerned” about the differing standards held by advisors and brokers when giving advice about securities to retail customers.

Wagner, who reintroduced her bill, the Retail Investor Protection Act, on Feb. 25 to require the DOL to wait to repropose its rule until the SEC issues its own fiduciary rulemaking, queried White as to whether her personal announcement had anything to do with President Barack Obama endorsing on Feb. 23 the DOL moving ahead with its fiduciary redraft.

“No,” White responded, stating that she had said in November that she would make her personal view about a fiduciary rulemaking known in the “short term.”

Rep. Blaine Luetkemeyer, R-Mo., told White to “please don’t cede your [the SEC’s fiduciary] position” to DOL. “Don’t let them regulate in your space.”

“We are separate from the DOL,” White said. “They have important ERISA jurisdiction and the agencies will proceed differently. It doesn’t mean we won’t consult; we have, we will.”

DOL is expected to propose its fiduciary redraft in spring or early summer.

White reiterated during her remarks at the hearing an SEC fiduciary rulemaking comes with many “challenges,” and that such a rule is “still a whether question; I am one of five votes on the commission.”

Rep. Maxine Waters, D-Calif., ranking member on the House Financial Services Committee, told White that she was “pleased” with White’s support of a “harmonized” fiduciary duty rule, adding “the devil is in the details, and we must take care not to weaken existing protections in pursuit of a uniform standard.”

While Waters said that she “shares” White’s view that “policing a fiduciary rule is vital,” she questioned her support of third-party exams for advisors in lieu of a user-fees approach.

“I support the approach endorsed by the former Republican Chairman and Democrats of this Committee, industry associations, and advocates: to simply pay for more SEC examiners with a modest fee on advisors,” Waters said, adding that when the committee last considered third-party exams the Boston Consulting Group said such exams would be “more expensive” than user-fees.

Third party exams is “not an optimal place to go,” White responded, but the agency needs to “complement” its advisor exams.

– Related on ThinkAdvisor: DOL’s Authority to Define Fiduciary Questioned


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