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SEC, DOL Fiduciary Rules Will Likely Be Different, White Says

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The Securities and Exchange Commission and the Department of Labor would need to continue to coordinate their fiduciary rulemakings as both regulators’ rules would not be identical, SEC Chairwoman Mary Jo White said Tuesday.

When asked during her Tuesday testimony before the House Subcommittee on Financial Services and General Government Committee on Appropriations, White said that while it’s “without question” that the SEC is developing its own uniform fiduciary rule for brokers and advisors, such a rule would likely not mirror DOL’s forthcoming fiduciary rule to amend the definition of fiduciary under ERISA.

“Assuming there was a DOL rule that preceded ours [the SEC’s] and overlapped, we would continue to talk about coordination and making our rules and the regime as compatible as possible,” White told members of the appropriations subcommittee. Rules “don’t always land identically; you try to make them land identically if you can, but [the SEC and DOL] are separate agencies, [with] separate statutory mandates.”

Declining to give a timeframe for when the SEC would issue a fiduciary rule proposal, White reiterated that devising such a rule is “complicated, not fast,” adding that the “SEC staff’s parameters of recommendations” regarding a uniform fiduciary rule “are being discussed with my fellow commissioners.”

White reiterated her previous statements that SEC staff provided “substantial technical assistance” to the DOL as it crafted its fiduciary rule, “including bringing staffs’ perspective on the broker-dealer model, [as well as] their views about possible impacts of various permutations of a [DOL fiduciary] rule.”

When asked if the SEC would “enforce” DOL’s fiduciary rulemaking, once released, White responded: DOL has “some enforcement authority on their own; we don’t enforce the Labor Department rules per se; the conduct can overlap with the jurisdiction. That’s why we try to be as consistent as we can. We have, and do have, parallel rules that are not totally consistent and we do our best to provide clarity.”

Added White: “As we sit here today, our [SEC regulated] BDs are subject to some DOL rules and vice versa, so there’s been overlapping in those spaces before.”

She also restated that passing an SEC fiduciary rulemaking is not her decision alone. “I’m one member; this is a commission decision. Again, it’s not up to me alone.”

White also stated that the SEC will “very soon” begin transitioning examiners from the broker-dealer space to advisor exams, adding that the SEC also needs to enhance its oversight of the Financial Industry Regulatory Authority.

FINRA performs “80% of BD exams,” White stated, so transitioning SEC examiners from the BD space to the advisor space means “we need to up oversight of FINRA.”

Some of President Barack Obama’s $1.781 billion 2017 budget request for the SEC would be used to add 127 new examination staffers, of which 102 would be added to examine investment advisors and investment companies.

— Check out LPL, Edward Jones Pre-DOL Rule Shifts: Smart Moves or Overreaction? on ThinkAdvisor.


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