News about the Securities and Exchange Commission’s advice standards package as well as the now-defunct Labor Department fiduciary rule (another one is on its way) has been unfolding at a swift pace since last month.
After we nearly collided on our way into a Georgetown University event in early November, SEC Chairman Jay Clayton told me that while the commission doesn’t have a “definitive timeline” on when the agency’s advice package will be finalized, the securities regulator is “aiming to get them done by September, if not sooner. We’re working on it virtually continuously.”
As noted in the SEC’s regulatory agenda, which Clayton told me “is a statutory requirement” in which the agency lays out its plans for the next year, the advice package is segmented into two areas, “the short-term and the long-term, and Regulation Best Interest and related matters are on the short-term agenda.”
Will there be changes to Reg BI and the Customer Relationship Summary (CRS) form?
Yes, Clayton said. “We’re looking at all the comment letters,” he told me. “This is where the [Administrative Procedure Act] has really worked. We’ve gotten a lot of good comments.”
In its fall regulatory agenda, the Labor Department also stated that it is planning to unveil a revised final fiduciary rule package next September to replace the one vacated this spring by the U.S. Court of Appeals for the 5th Circuit.
“The department is considering regulatory options in light of the 5th Circuit opinion,” the DOL reg agenda states.
Steve Saxon, principal at Groom Law Group in Washington, said that with Labor and the SEC “working on investor protection rules (and with both agencies targeting the same deadline), this hints that the two agencies may be working together to develop coordinated rules to protect American savers.”
Form CRS Investor Testing Results
Soon after my chat with Clayton, the SEC released the results of its investor testing on the agency’s proposed Form CRS.
Researchers at the RAND Corporation conducted a nationwide survey of households — the Relationship Summary Survey — to gather feedback on a sample Relationship Summary.
In particular, the 122-page report explains, the RAND team “designed and fielded the Relationship Summary Survey through RAND’s nationally representative American Life Panel to collect information on the opinions, preferences, attitudes and level of self-assessed comprehension of the U.S. adult population with regard to a sample Relationship Summary.”
The SEC sampled the 1,816 panel members who previously completed the survey on the Retail Market for Investment Advice, which was released in mid-October.
The investor report found, for instance, that more than half of respondents believe the Relationship Summary is “too long,” with almost all of the remainder reporting that the length is “about right.”
Another finding: The “Conflicts of Interest” section of the form is second only to the “Fees and Costs” section in terms of reported difficulty. One-third of respondents found the “Conflicts of Interest” section to be difficult or very difficult to understand.
Barbara Roper, director of investor protection for the Consumer Federation of America, told me the day the survey was released that after a quick review of the report she believes it’s “a very positive step that the commission engaged in the sort of qualitative testing we’ve been advocating.”