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Regulation and Compliance > Federal Regulation > SEC

SEC ‘Working on’ Fiduciary Rule, Concerned About State Laws: Clayton

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Securities and Exchange Commission Chairman Jay Clayton told lawmakers Wednesday that the agency is “working on” a fiduciary rule proposal and that he’s concerned about the state fiduciary standards that are cropping up.

Rep. Ann Wagner, R-Mo., asked Clayton during a hearing held by the House Financial Services Committee on Wednesday if he was “concerned about the patchwork” of state fiduciary laws, pointing specifically to the one promulgated in Nevada.

“I am,” he said.

Wagner, who introduced on Sept. 27 her bill, the Protecting Advice for Small Savers Act, to repeal the Labor Department’s “misguided” fiduciary rule, reiterated that her PASS Act establishes a best-interest standard for broker-dealers. The bill also keeps a fiduciary rulemaking at the SEC.

“I believe the PASS Act of 2017 would certainly provide clarity for the investor,” Wagner said. “If you are sitting across from a broker-dealer and maybe you have two different accounts with them, it is important that you have the same standard. Unfortunately, that is not the current practice and that is causing both confusion and harm.”

She then asked Clayton: “How important it is to fix this; to move from this bifurcated regulatory regime created under the Department of Labor rule?”

Clayton said during the hearing, titled “Examining the SEC’s Agenda, Operations and Budget,” that while he “initially focused on” cybersecurity upon becoming chairman, the “other initial” focus he has is on a fiduciary rulemaking.

He reiterated his thanks to Labor Secretary Alexander Acosta for asking the agency to collaborate on the fiduciary rule. “We have been,” Clayton said. “A lot of the themes that you outlined [in the PASS Act] are the themes that I have.”

Investors, he said, “should have choice — what type of account they want, what type of relationship.” There should be clarity. “I recognize that there’s not the kind of clarity that there should be in the marketplace,” he added. “There ought to be consistency with us and the Department of Labor. We can’t have asymmetric standards.”

Also, “we have to cooperate. They have a mandate, we have a mandate; they’re not the same, but we can cooperate and get there, I believe … The devil is in the details, and we’re working on it.”

Wagner then asked Clayton the agency’s “next step” concerning a fiduciary rulemaking. “When will the SEC be acting?” she asked.

Responded Clayton: “The next step in anything like this would be a rule proposal; we’re working on a such a proposal. We want to work with the Department of Labor. If this were easy, it would already be fixed. We’ve got a lot to do. But I’m confident that we’re going to put forward something that addresses those four issues — and that has a standard that protects investors and that they understand.”

In questioning on the recent hack of the SEC’s corporate filing system, EDGAR, and the recent Government Accountability Office report detailing information control steps the agency needs to take, Rep. Maxine Waters, D-Calif., told Clayton that the SEC has been “seriously” underfunded.

“Do you feel that you have the resources available to you to correct the financial systems that GAO identified need so much work?” she asked.

Clayton responded that for fiscal year 2018, the agency’s budget is flat, but that “going forward, I’m asking for a 7% increase; a substantial portion of that going to cybersecurity. I would say that next thing after cybersecurity is market integrity (those two are related), and then I’d like to put more money into retail fraud.”

He noted that he wants to hire six additional employees for cybersecurity. 

— Check out SEC ‘Pushing’ for Fiduciary Rule, Clayton Says on ThinkAdvisor.


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