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Aguilar, TD’s Schweiss Discuss How an SEC Fiduciary Rule Could Work

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As the Labor Department and the Securities and Exchange Commission coordinate regarding a uniform fiduciary standard, industry officials are weighing in on the likely outcome of an SEC rule, but don’t see movement on such a rulemaking until the agency has a full commission.

“There are mechanisms whereby the DOL and SEC, working together, can come up with a rule that is similar for both types of advisors,” former SEC Commissioner Luis Aguilar told ThinkAdvisor.

SEC and DOL “can come together and agree on the wording. They can also try to come together and work in a behind-the-scenes fashion as the years pass,” Aguilar said.

Having said that, “I think the SEC has broader authority than the DOL, and I think the SEC can do a rule that says: “If you give investment advice to whomever — retirement plans and individuals, hedge funds — you’re covered by the Investment Advisers Act and this is the standard you should follow.”

Skip Schweiss, managing director of Advisor Advocacy & Industry Affairs at TD Ameritrade Institutional and head of the firm’s Retirement Plan Solutions platform, added that the SEC “could do a rulemaking and then DOL could say: ‘If you’re in compliance with the SEC’s rule, that’s an exemption under the DOL rule.’”

Aguilar and Schweiss spoke to ThinkAdvisor Thursday after their panel discussion at the MarketCounsel conference in Miami Beach.

Labor Secretary Alexander Acosta told lawmakers in mid-November that Labor stands ready to levy enforcement actions against advisors exhibiting “willful” violations of the fiduciary rule’s Impartial Conduct Standards, which became effective on June 9.

Schweiss opined that while the impartial conduct standards “are here to stay,” the “contract, private litigation and warranties” that are being pushed back 18 months are “subject to analysis.”

The compliance date for the fiduciary rule’s Best Interest Contract Exemption and the Principal Transactions Exemption, and the applicability of certain amendments to Prohibited Transaction Exemption 84-24 (PTEs), has been moved to July 1, 2019. Schweiss sees Labor and the SEC coordinating on how to address those exemptions, adding that’s “possibly” what an SEC rule might address.

Attorney Aguilar opined that the agency coming out with a fiduciary proposal in 2018 “is tricky.”

As it stands now, the agency only has three commissioners, Aguilar said. “I don’t think this [fiduciary] issue will be dealt with until there are five commissioners,” he said, adding that full Senate confirmation of SEC Commissioner nominees Hester Peirce and Robert Jackson via voice vote will likely come by year-end.

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