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SEC Fiduciary Rule to Include ‘Deep Economic Analysis’: Chief White

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While the Securities and Exchange Commission’s uniform fiduciary proposal for brokers and advisors will include a “very deep economic analysis” to judge the rule’s impact on retail investors, the agency’s chairwoman, Mary Jo White, told House lawmakers Wednesday that she still couldn’t nail down a specific time for the fiduciary plan’s release.

However, the agency does plan to release within the next few months an “updated” accredited investor definition, White told members of the House Financial Services Committee during a hearing to assess the agency’s agenda.

Chairman Jeb Hensarling, R-Texas, probed White on whether the SEC has performed an “updated” economic analysis on the rule since the agency’s staff studied the issue in 2011.

Part of the fiduciary rulemaking “will be very deep economic analysis to judge impacts and all relevant baselines,” White said. “There will be economic analysis completed before there’s any proposal. There’s always economic analysis, as there should be, before you proceed with any adoption.”

Hensarling questioned White as to whether the economic analysis will be available to his committee as well as to the public before the rule is proposed. Unless the agency’s Division of Economic and Risk Analysis issues a paper on the topic, White responded, such information is “part of the proposal and made public” then.

“We would encourage you to do that,” Hensarling responded, suggesting that DERA issue such an analysis before a proposed rule.

Rep. David Scott, D-Ga., told White to “get more aggressive” in issuing a fiduciary rule. “When we wrote Dodd-Frank, we gave exclusive authority to the SEC on the best interest standard on fiduciary,” Scott said. “Why is the SEC allowing DOL to take over your territory?”

White responded: “I don’t’ view it that way. I think, again, we are separate agencies,” and DOL “has authority in the ERISA space.”

Reiterating that a fiduciary rulemaking is “complex and not quick,” White said the agency is “working toward, in the very short term, most of the details of what the [fiduciary] proposal will be.”

As to a revamped accredited investor definition, White said that the agency is taking a “deep dive look” at the accredited investor criteria, “not just net worth and income,” and that SEC staff is “coming to a conclusion on their work.”

In updating the definition, the agency is “looking … beyond net worth and income [to] experience and other qualifications that should entitle you to be an accredited investor,” White said. “We’re looking quite broadly.”

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