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Regulation and Compliance > Federal Regulation > SEC

Clayton: SEC Fiduciary Rule on Track Despite DOL Court Defeat

By Melanie Waddell

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The 5th Circuit Court of Appeals ruling issued Thursday torpedoing the Labor Department’s fiduciary rule isn’t impeding the Securities and Exchange Commission’s efforts to write its own fiduciary rule, the agency’s chairman, Jay Clayton, said Monday.

“Seventy-two hours later” after the 5th Circuit Court of Appeals struck down Labor’s fiduciary rule, “it hasn’t affected the way I’m approaching this” fiduciary rulemaking at the SEC, Clayton said during a question-and-answer session at the Securities Industry and Financial Markets Association’s annual compliance conference, held in Orlando, Florida.

(Related: SEC Fiduciary Rule Likely to Address Broker, Advisor Titles: Peirce)

Ken Bentsen, president and CEO of SIFMA, queried Clayton on how soon the agency would release its own fiduciary proposal, asking if it would be “soon.”

Clayton responded: “Soon is fair. From my perspective, the sooner the better. I’m not sitting on this.”

Bentsen asked, does the 5th Circuit decision “affect [the SEC’s] timing” on releasing its own fiduciary rule?

“I think there’s a lot going on there [in the ruling] for what it means for the Department of Labor,” Clayton replied. “I haven’t had any discussions with the Department of Labor on what it means from a broader perspective of administrative law and the approach to administrative law. We’ll see, but as far as I’m concerned, we’re moving forward.”

A Labor Department spokesperson said in a statement that with the 5th Circuit vacating the 2016 fiduciary rule in its entirety, “pending further review, the Department will not be enforcing the 2016 fiduciary rule.”

The U.S. Court of Appeals for the 5th Circuit voted 2-1 on Thursday to vacate the Labor Department’s fiduciary rule.

The nine plaintiffs in the 5th Circuit case included the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Institute.

The ruling comes one day after Labor won a case in federal court brought against its fiduciary rule by Market Synergy Group, an insurance distributor.

The appeals court struck down the entirety of the fiduciary rule.

Dale Brown, president and CEO of FSI, said that while the court’s decision “in our favor is critical because the rule would have pushed the cost of retirement advice and planning services out of the reach of many Main Street investors, our work is far from over.”

FSI, he said, is ”now redoubling our efforts to support the SEC’s current push to create a uniform standard that protects investors and their full access to the advice, products and services they depend on to save for a dignified retirement, care for aging parents and educate their children.”

Crafting an SEC Fiduciary Rule

Clayton stated Monday at the SIFMA compliance event that a client’s relationship with their financial professional usually includes dealing with ”at least five” regulators.

“I’ve convinced myself that we need to do something to try and bring that five, six, seven number [of regulators] down, and I would like the SEC’s action in this area to be the focal point around which people say, ‘Yes, that’s how we should look at the relationship. That’s the basis on which you should have to demonstrate compliance.’ That is the objective. How we get there we’ve been working very hard on.”

Noting the comments that have been filed regarding an SEC fiduciary rulemaking, Clayton said that “most people believe there should be a clearly articulated standard for broker-dealers and that you can bring some clarity as well to the investment advisor standard, which has been talked about a lot but not in great substance,” Clayton said.

“I see no objection to my view that we should do our best to clarify, in plain language, what that standard means. I think we’ve demonstrated that you can do that in a fairly short plain English document.”

— Related on ThinkAdvisor:

Melanie Waddell

@Think_MelanieW

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