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Regulation and Compliance > Federal Regulation > SEC

SEC Chief Wants Public Input on a New Fiduciary Rule Before Starting

By Bernice Napach

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Securities and Exchange Commission Chairman Jay Clayton wants to hear from individual investors and others about whether the commission should proceed with its own fiduciary standard for broker-dealers and investment advisors and what that should look like.

“I encourage the public to send us feedback and any data that may be helpful to us,” said Clayton, in his speech before the Economic Club of New York on Wednesday, his first major speech since becoming chairman.

Clayton was referring to a wide-ranging request for public comments on the “Standards of Conduct for Investment Advisers and Broker-Dealers” published on the SEC website on June 1 of this year, less than a month after he was sworn into the job.

(Related: SEC Jumps Into Fiduciary Rule Fray, Seeking Comments on ‘Future Action’)

He told the audience that any SEC action on investment advice and disclosure to investors “will need to be carefully constructed so it provides appropriate and meaningful protections but does not result in Main Street investors being deprived of affordable investment advice or products.” He also said, as he has before though not necessarily using the exact same words, that he hopes to work in concert with the Labor Department to serve “the long-term interests of Mr. and Ms. 401(k).”

(Related: SEC Moving Forward on Fiduciary Rule, Clayton Says)

Clayton didn’t elaborate or take any questions from reporters on these or other remarks.

Implementation of Labor’s fiduciary rule began on June 9 and full compliance is not required until Jan. 1, 2018, but the Labor Department itself has issued a Request for Information from the public that could be used to revise the rule and delay its full implementation.

(Related: DOL Releases Fiduciary Rule Request for Information)

In keeping with a focus on retail investors, Clayton said the SEC is developing a plan to create a Fixed Income Market Structure Advisory Committee that, like a similar committee on the stock market, would be comprised of outside experts to advise the commission on regulatory issues affecting that market.

He also noted that the chairmen of the House Financial Services Committee and its subcommittee on capital markets have called for a hearing on the structure of the fixed income market and that he hoped the SEC’s Equity Market Structure Advisory Committee, set to expire in August, would be extended into 2018.

“The time is right for the SEC to broaden its review of market structure to include specifically the efficiency, transparency and effectiveness of our fixed income markets,” said Clayton, noting that many baby boomers who invest in fixed income as stable assets during retirement “may not appreciate that fixed income products … differ significantly from the better-known equities markets.”

Early in his speech Clayton highlighted the three-part mission of the SEC: to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation.

Regarding the last two mandates, Clayton opened the door to easing disclosure requirements for publicly traded companies, suggesting that those requirements are one reason for the “50% decline” in the number of U.S. listed public companies over the last two decades.

He said the SEC “should review its rules retrospectively” and assess the financial costs and costs in terms of time of any new rules under consideration. “The commission needs to make sure at the time of adoption that we have a realistic vision for how rules will be implemented as well as how we and others intend to examine for compliance…. We need to increase the attractiveness of our public capital markets without adversely affecting the availability of capital from our private markets.”

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