Republican SEC Commissioner Michael Piwowar’s Monday announcement that he will resign his position on July 7 could throw a wrench into the progress — or not — of the agency’s recently released standards of conduct proposal for brokers and advisors.
Piwowar’s term is set to expire on June 5, but commissioners can stay on for 18 months after their term expires.
Commissioner Kara Stein, a Democrat whose term expired last year, is also set to leave the commission this year.
Piwowar and Stein are set to leave as the agency takes comments on its recently released standard of conduct proposals for brokers and advisors.
The “wide difference of views among the commissioners” when voting on April 18 to put the three-pronged proposal out for public comment “means that reaching a final rule is going to require a compromise,” former SEC Commissioner Luis Aguilar told ThinkAdvisor in a Tuesday email message.
“That need hasn’t changed with the departure of Commissioner Piwowar,” Aguilar said. “In fact, Chairman [Jay] Clayton may actually have an easier time reaching a compromise with just three other commissioners rather than four commissioners, as there is one less view to consider.”
Ultimately, Aguilar added, “if everyone keeps the needs of investors foremost in mind, it remains possible for a principled and rational compromise to be reached that benefits investors.”
Bob Plaze, the former co-director of the SEC’s Division of Investment Management, agreed in another comment to ThinkAdvisor that Piwowar and Stein’s departures “themselves will not likely ‘complicate’ the rulemaking,” as its “unlikely the rulemaking would be ripe for adopting” by the end of the year.
“Who replaces [Piwowar and Stein] and what their views are on the rulemaking is the great unknown, and may either complicate or facilitate adoption of the rules,” added Plaze, who’s now a partner at Proskauer Rose in Washington.
Former SEC Chairman Harvey Pitt told ThinkAdvisor the same day that the SEC standard of conduct proposal “itself recognized the need for feedback, and provided a several-month comment period, reflecting the expectation (and hope) that the details of the rule would benefit by meaningful public input.”
As a result, said Pitt, who’s now head of Kalorama Partners in Washington, “I think the rule’s finalization will take some time. Mike’s input on the proposal was apparent, and I think it is a loss to the Commission that he won’t be there to help craft the final product. But, I think that this is a topic of such importance that the Mike’s departure won’t materially delay progress on finalizing the proposal, especially if the White House promptly nominates a successor.”
Piwowar told President Donald Trump that “it has been an honor to serve the American people at such a respected agency and work with such dedicated and talented staff,” noting that he began his career in public service at the SEC 16 years ago as a visiting academic scholar and later as a senior financial economist.
“It was privilege to return to the SEC in August 2013 as a commissioner,” Piwowar said, thanking the president for “the trust you placed in me to serve as acting chairman at the beginning of your administration. We accomplished a great deal for the ‘forgotten investor’ in a short period of time.”
SEC Chairman Jay Clayton said in a statement that during the past five years as commissioner, “and in his prior tenure at the SEC as an economist, Mike has worked tirelessly in support of the agency’s mission,” stating that he was “particularly grateful to Mike for emphasizing the importance of economic analysis in the agency’s efforts, and for raising the level of involvement and rigor of the Commission’s analysis in matters ranging from rulemaking to enforcement.”
A well-known critic of the Department of Labor’s fiduciary rule — referring to it as a “terrible, horrible, no good, very bad” rule — Piwowar reluctantly voted to put the agency’s standard of conduct proposals out for public comment.
“I cannot hide my misgivings about certain aspects of the nearly 1,000-page tome before us today,” Piwowar said during his remarks at the April 18 open meeting to consider the proposal at SEC headquarters in Washington. “The size of this package alone gives me pause. If it takes us that many pages to explain what we are trying to do, dare I say that our solution might necessarily lack the clarity that is needed to address retail investors’ confusion?”
Yet Piwowar said that he “overwhelmingly” supported putting the proposals out for public comment.
“No longer can anyone say ‘The SEC really needs to do something about this.’”
— Check out NASAA Releases Snapshot of State Advisor Landscape, Including Top Exam Infractions on ThinkAdvisor.