The state of the financial services industry is not as vibrant as it was a year ago. Nor is the economy.
Those are just two of the takeaways from a press briefing by the CEO and chairman of the Securities Industry and Financial Markets Association on Thursday.
According to SIFMA President and CEO Ken Bentsen, bond issuance has declined this year and equity IPOs are well below their peaks in 2014 and the 1990s.
Total bond issuance is up 1.2% this year; excluding Treasuries, however, it’s down 8%, reflecting declines in the issuance of municipal bonds (down 14%), corporate bonds (off 16.5%) and asset-backed securities (down 10%). Mortgage-related securities issuance rose but only slightly, up 0.8%.
Looking ahead, SIFMA’s survey of 21 industry economists forecasts 2.6% GDP growth in 2019, down from 2.9% for all of 2018 as well as another interest rate hike by the Federal Reserve later this month. (The full report of its Economic Advisory Roundtable will be released next week.)
In their press briefing, Bentsen and SIFMA Chairman Jim Allen, the chairman & CEO of Hilliard Lyons, a wealth management firm, discussed some of SIFMA’s priorities and expectations for 2019, among them the SEC’s proposed best-interest standard for broker-dealers.
Allen said there could be some modification in the best-interest proposal coming as soon as the second quarter of 2019 to make it more user-friendly for clients. Bentsen said that SIFMA has asked the SEC for clarification about the definitions of materiality and retail in the proposal and about how broker/dealers will be required to mitigate conflicts of interest.
“We need more guidance on what those conflicts are and how they [the SEC] will define mitigation,” said Bentsen, who added that SEC Chairman Jay Clayton is “100% committed to seeing this through, trying to get every vote on the commission.”
Bentsen said he’s “quite convinced we will see this rule come to fruition sometime in 2019; the sooner the better.”
Come January, one of biggest critics of Reg BI, Commissioner Kara Stein, will no longer be at the SEC.
But the House of Representatives is expected to be chaired by Rep. Maxine Waters, D-Calif., who has opposed the best-interest standard. That won’t prevent the SEC from moving ahead on the proposal although Waters will have a bigger bully pulpit from which to oppose it.
Asked about Waters’ expected incoming chairmanship of the House Financial Services Committee as well as other committee changes as Democrats take over House leadership, Bensten said there’s likely to be less policy change because of the divided government and fewer “rifle shot” bills proposed in committee, apparently referring to bills that have a narrow focus and benefit few.
On the growing number of states proposing their own fiduciary standards, Bensten said he was actively having discussions with state securities regulators including Nevada stressing that a single national policy is preferable to bifurcated rules from states and the national government. It’s important that the SEC remain the “principal agency over investor protection and the securities market,” said Bentsen. “The states should let the SEC proceed as Congress intended in Section 913 of the Dodd-Frank Act.”
He didn’t know whether Republican-sponsored retirement legislation introduced in the current Congress will pass in the lame-duck session but said he expects parts of the bill, including the multiple-employer plan provisions, will come up in the next Congress.