Former SEC Chairman Arthur Levitt says because the Securities and Exchange Commission has become “locked” and “divided philosophically” on whether to move ahead on a fiduciary rule, the industry should let the Department of Labor move ahead first.
The SEC will be “locked in a conflict on this [fiduciary rulemaking] issue for a long, long time,” Levitt said in an interview with the Investment Adviser Association to commemorate the 75th anniversary of the Investment Adviser Act, which takes place Saturday.
The solution: “We should try to move ahead on the standard put forth by the Department of Labor,” Levitt said. “Is [the DOL proposal] perfect in terms of wording and content? Probably not. But I don’t know that there’s any rule that is ever perfect or that never has unintended consequences.”
Added Levitt: “We have long passed the time that we can afford to have side by side, advisors with one set of responsibilities and brokers with a much easier set of responsibilities and standards.”
The IAA got feedback from a number of industry professionals, regulators and other experts as the Investment Advisers Act celebrated 75 years.
Andrew Bowden, the former head of the SEC’s Office of Compliance Inspections and Examinations, told IAA that the industry is on a “collision course,” as there are “vastly different regulatory schemes that address essentially the same business – advising retail investors.” He pointed to the “highly prescriptive regulatory scheme for broker-dealers” under FINRA rules; the Advisers Act model, “which is principles-based (as are most state regulatory schemes)”; and the proposed DOL model, which he argued “would be a significant departure from both.”
All of those “regulatory schemes,” Bowden continued, “address the same business activity and behavior, and we’re at the point where it’s best for investors and our country to pick one.”
Bowden, who’s now senior vice president and general counsel of Jackson National Life Insurance Co., said that his “prediction and hope” is that the Adviser Act model prevails.