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Regulation and Compliance > Federal Regulation > SEC

SEC to Take Up Fiduciary Proposal on April 18

By Melanie Waddell

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The Securities and Exchange Commission plans to consider the agency’s long-awaited — and much anticipated — fiduciary proposal on Wednesday.

In an open meeting notice on the agency’s website, the securities regulator states that it will consider whether to propose:

  • New and amended rules and forms to require registered investment advisors and registered broker-dealers to provide a brief relationship summary to retail investors.
  • A rule to establish a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer.
  • A Commission interpretation of the standard of conduct for investment advisors.

SEC Chairman Jay Clayton reiterated Tuesday that issuing a fiduciary proposal soon was a priority for him. “I’ve been clear, the sooner the better. We’re working through the process. I’d like to see it very soon,” Clayton said at the Equity Market Structure symposium in Chicago.

Clayton said in mid-March that the recent 5th Circuit Court of Appeals ruling torpedoing the Labor Department’s fiduciary rule wasn’t impeding the SEC’s efforts to write its own fiduciary rule.

“Seventy-two hours later” after the 5th Circuit struck down Labor’s fiduciary rule, “it hasn’t affected the way I’m approaching” 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.

As it stands now, the SEC is taking a four-pronged approach in cultivating its fiduciary rule, Investment Adviser Association President & CEO Karen Barr said during the group’s compliance conference in Washington in mid-March.

The first part includes the agency writing a separate rule to require a best-interest standard for broker-dealers under the Securities and Exchange Act of 1934. The second step is a disclosure document for brokers and advisors, which will be “short and concise” and given to investors. The third step is “interpretive guidance” under the Investment Advisers Act of 1940 setting out what it means to be a fiduciary; and the fourth component would be a provision on the use of titles.

Indeed, SEC Commissioner Hester Peirce, who spoke at the IAA event, said she supports the rule including measures to address broker and advisor titles. “I wouldn’t be surprised if we see something along those lines,” in the fiduciary proposal, explained Peirce, perhaps with “guidance on what they can and cannot call themselves.”

— Check out Clayton Says ‘Sooner the Better’ for SEC Fiduciary Rule on ThinkAdvisor.

Melanie Waddell

@Think_MelanieW

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