Fiduciary proposal seen coming, adviser SRO seen slipping into oblivion

Industry bigs expect the SEC to release concept for single standard of care this summer; no such timeline for self-regulator

Feb 1, 2013 @ 2:14 pm

By Dan Jamieson

Fiduciary standars, SRO, SEC
+ Zoom
From Congress to SEC: SRO bill lost in transition ((Photo: Bloomberg News))

The Securities and Exchange Commission is expected to issue a concept release perhaps as early as this summer on how to establish a uniform fiduciary duty for brokers and advisers. But a Congressional call to establish a self-regulator for advisers appears to be on a fast track to nowhere.

Skip Schweiss, managing director of adviser advocacy & industry affairs at TD Ameritrade Institutional, told InvestmentNews that the SEC could have a concept release this summer, asking for comment on how a fiduciary standard would work and the best ways to perform a cost/benefit analysis.

“We wouldn't expect that [release] to come out before the new commission is in place” under Mary Jo White, whose nomination as chairman is pending, said Kevin Carroll, associate general counsel at the Securities Industry and Financial Markets Association, during a media briefing Friday at the TD Ameritrade Institutional conference in San Diego.

That means the release would probably come in the second or third quarter of the year, Mr. Carroll said.

“We are working on a request for information … but have not determined timing,” said SEC spokesman John Nester in an email.

The SEC was directed under section 913 of the Dodd-Frank financial reform law to consider implementing a fiduciary standard for anyone giving personalized financial advice, with protections equal to the Investment Advisers Act of 1940.

The brokerage and advisory industries have been arguing about how to define such a standard.

“Congress has given the SEC a virtually impossible task,” Mr. Schweiss said. “How do you make a fiduciary out of brokers who sell products?”

Kevin Keller, chief executive of the Certified Financial Planner Board of Standards Inc. faulted Sifma for proposing what he feels is a brand new standard. “We think it's better to start with what we have [with the Advisers Act] and build from there,” he told reporters Friday.

“I really think it means no more than a true and actual fiduciary standard,” Mr. Carroll said. “There are no gradations of a fiduciary standard. It would be uniform.”

Ron Rhoades, president of ScholariF Inc., told reporters that different fiduciary standards do exist, and that the brokerage industry would have to figure out how to address compensation issues, soft dollars and shelf-space fees.

“Those things are very problematic with a fiduciary standard,” Mr. Rhoades said. “Those are the types of issues that need to be discussed in detail.”

The solution will be implementing disclosures, client consents, training and compliance systems for managing the conflicts inherent in the brokerage business, Mr. Carroll said.

Mr. Schweiss is concerned about a fiduciary standard riddled with exemptions for the brokerage industry, “but we have to move forward on this,” he said in an interview late Thursday.

On the issue of an adviser SRO, observers don't expect much if any Congressional action this year, since the idea has encountered bipartisan opposition.

Mr. Schweiss is planning a series of fiduciary summits, the first in June in conjunction with TD Ameritrade's Elite conference for top advisers, to be held in West Palm Beach, Fla., and another one six to 12 months later in Washington D.C.

“What we're trying to do is find a way forward” on the fiduciary issue, Mr. Schweiss told InvestmentNews. “We're trying to get a spectrum of voices together on this.”

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Jun 27

Webcast

Emerging Market Debt: 5 Forces at Work

When it comes to emerging market debt, there are a series of forces that help you drive better results for your clients. In today's continually changing market environment, it is critical to know the forces at play to help keep your investment... Learn more

Accepted for 1 CE Credit from the CFP Board. Approved by IMCA for 1 CIMA®/CIMC®/CPWA® CE credit. Approved for 1 CFA Credit.

Featured video

Events

Pershing's Cirrotti: What's next for the fiduciary rule?

The Department of Labor's new fiduciary rule will have a lasting impact on this industry. Have we finally reached the finish line? Pershing's Rob Cirrotti explains what is to come.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

10 funds with largest 3-year outflows

Even well-managed funds that have beaten the S&P 500’s 10.1% average annual gain have watched investors flee.

Wirehouse training programs are back

At one time, major brokerage houses ran large, expensive training programs for thousands of young brokers, and now it looks as if they are about to return to that model.

New military pension rules need financial advisers to step up and serve

Matching defined contribution plan expected to see more money, more need for sound advice.

Brian Block's $4 million bonus was tied to a key metric at ARCP

Prosecution rests case in fraud trial against CFO of American Realty Capital Properties.

Edward Jones is winning the Google search war

Brokerage firm's digital marketing investment helps land it at the top of local and overall search engine results, report finds.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print