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SEC ‘Flat-Out Doing’ a Fiduciary Rule: Chief White

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Securities and Exchange Commission Chairwoman Mary Jo White said Tuesday that while SEC staffers are “fully engaged” in formulating a uniform fiduciary rule for brokers and advisors, she couldn’t say when such a rule would be proposed, as “it’s not a short, quick, uncomplicated” rulemaking.

Speaking during a question-and-answer session at the Securities Industry and Financial Markets Association’s annual conference in Washington, White stated that SEC staff is “full-on focused on” drafting a fiduciary rule, as well as a third-party exam rule for advisors.

However, White noted the agency must “calibrate [a fiduciary rule] very carefully” so that it “raises the bar of compliance [but] does not have unintended consequences.”

White declined to tell reporters on the sidelines of the SIFMA meeting after the Q&A whether a fiduciary rule would be out before the end of the Obama administration, but stated that the SEC is “flat-out doing” such a rulemaking.

But Rep. David Scott, D-Ga., stated during an afternoon panel discussion that the ”SEC is not doing what they should be doing” in terms of proposing a fiduciary rulemaking, adding that lawmakers “clearly stated’ in Section 913 of Dodd-Frank that redefining fiduciary should be dealt with at the SEC. Because of ERISA, DOL “squeezes in through the back door.”

DOL, Scott stated, is “wrong in terms of the approach” it’s taking in its rulemaking, which he said will have “unintended consequences” for low- and moderate-income savers.

“What sense does it make to have two fiduciary definitions?” Scott asked.

Rep. French Hill, R-Arkansas, stated on the panel with Scott that ”the existing rules are in place” at the SEC and the Financial Industry Regulatory Authority ”to handle this [fiduciary] issue.” The SEC and FINRA, Hill said, “could create a best interest standard. The commission should be doing this [fiduciary rulemaking] with FINRA.”

Both Hill and Scott told reporters after the panel that they would recommend that language to defund DOL’s rulemaking be included in the conferees report on the omnibus spending bill to be debated on Dec. 11.

Hill also told reporters that there has been “discussion” in the Senate about introducing similar legislation to Rep. Ann Wagner’s bill, the Retail Investor Protection Act, which passed the House on Oct. 27; Wagner’s bill, H.R. 1090, would stop DOL from moving forward on its fiduciary rule.

Ken Bentsen, SIFMA’s president and CEO, told ThinkAdvisor in an interview after White’s remarks that the SEC chief “underscored” during her comments “the complexity” of a fiduciary rule. The takeaway from White’s comments, Bentsen said, is that “this [fiduciary issue] is very complex and there are risk factors, including the cost to retail investors and the risk of cutting retail investors off from affordable advice; that’s why [the SEC is] taking that much time.”

Bentsen noted that the number of “substantive comments” the Department of Labor has received on its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act signifies “that DOL needs to repropose its rule.”  

Said Bentsen: “There are so many risk factors” in a fiduciary rulemaking. “White indicated what [the SEC] has been going through, [and] they are the agency of record in terms of capital markets regulation and regulation of broker-dealers and advisors.”

Members of Congress continue to say that “if nothing else, DOL needs to repropose its rule,” Bentsen said. “We think they should.”

A bipartisan group of lawmakers said Nov. 6 that they plan to introduce legislation soon that they say will “protect the retirement savings of all Americans” from the upcoming release of the DOL’s fiduciary rule.

Rep. Scott also co-signed a recent letter sent by lawmakers to Labor Secretary Tom Perez asking DOL to hold another 15- to 30-day comment period on its fiduciary rule before finalizing it.

Scott told reporters that lawmakers have yet to hear from DOL on that request.

— Check out Deadlock: Why the SEC’s Stalled on a Fiduciary Standard for Brokers on ThinkAdvisor.