A year ago, the Securities and Exchange Commission said it would assess the costs of a potential rule that would raise investment-advice standards for brokers. One reason that a request for data has not yet been released is because SEC commissioners keep tweaking it.
“It's about ready for prime time,” SEC member Luis Aguilar told reporters on the sidelines of a Practising Law Institute conference in Washington on Friday.
Last week, SEC Chairman Elisse Walter told the Senate Banking Committee that the cost-benefit-information query would go out “in a month or two.”
First it has to pass muster with the current four-member SEC. The document has circulated several times to each of the commissioners. Instead of achieving the necessary number of sign-offs, however, it is continuously modified – sometimes by just a few sentences at a time.
“The merry-go-round has not yet stopped,” Mr. Aguilar said. “I have seen versions that I would be happy to approve, but they keep changing it and tinkering with it.”
The cost-benefit analysis is a key step in the long road toward a rule that would impose uniform fiduciary duty for retail investment advice and, possibly, harmonize regulations governing investment advisers and brokers.
The Dodd-Frank financial reform law gave the SEC the authority to proceed with rulemaking – something also recommended by a 2011 SEC study in order to better protect investors who are confused by the differing advice standard advisers and brokers must meet. Advisers have to act in the best interest of their clients. Brokers meet a less stringent suitability standard that requires them to sell products that meet a client's investment needs and risk tolerance.
Skeptics of fiduciary duty have been urging the SEC to be careful in implementing such a rule, if it decides to move ahead. They say that a flawed rule could raise regulatory and liability costs for brokers, driving them toward the fee-based model and limiting advice choices for investors.
The SEC has not moved on the rule for more than two years in part because it has nearly 100 mandatory Dodd-Frank rules to implement. Fiduciary duty is optional.
Another obstacle is tension over a potential rule.
After last week's Senate hearing, Ms. Walter acknowledged there is a difference of opinion on the commission about the potential market impact of uniform fiduciary duty.
“I don't know that I would characterize it as [a] deep [disagreement],” Ms. Walter said. “I think we all come at it from slightly different angles.”
The catch with the cost benefit analysis is that it may be presented as something like a concept release. In an attempt to obtain as rich a trove of cost information as possible, the SEC might outline how uniform fiduciary duty might work. That raises the stakes for the cost document and may be contributing to the delay in releasing it.
“It's an issue that's very important to me,” Ms. Walter told reporters at Friday's PLI conference. “Many things take longer than we would like them to, and we have a rather full plate. But we're actively at work on that.”
But it may take a few more iterations to get the cost-benefit analysis document out the door.