SEC Chairwoman Mary Jo White says agency mulling fiduciary duty

Staff recommendations on a potential rule to raise retail investment advice standards are being considered by commissioners, but a proposal is not imminent

Sep 12, 2016 @ 2:07 pm

By Mark Schoeff Jr.

Securities and Exchange Commission members are mulling a staff report on a potential rule to raise retail investment advice standards, but the agency is not any closer to taking action, SEC Chairwoman Mary Jo White said Monday.

“My fellow commissioners have a very detailed outline of the staff's thinking on specific recommendations,” Ms. White told an audience of state regulators at the North American Securities Administrators Association annual conference in Providence, R.I.

But she reiterated that a proposal is not imminent.

“I can't give you specific timing,” Ms. White said. “It's not going to be quick.”

The Dodd-Frank financial reform law enacted in 2010 gave the SEC the authority to propose a regulation that would require all financial advisers to act in the best interests of the clients — a mandate that currently only applies to investment advisers.

While the SEC has stalled on the issue, the Labor Department released a final rule earlier this year that requires advisers to provide a fiduciary standard of care to clients in retirement accounts.

The first phase of implementation is scheduled for April, but the DOL is currently fighting lawsuits in several courts to halt the rule.

The SEC has not been able to advance its own fiduciary rule due to disagreements among commissioners over whether and how to proceed. Past and current Republican members have resisted a fiduciary rule, while Democrat Kara Stein has not stated a clear position.

Ms. White said she “strongly” supports a fiduciary duty rule but that overcoming divisions within the SEC is difficult.

“My fellow commissioners are constantly asking me to remind everyone that I'm one vote,” she said.

Adding to the challenge on the issue is that the SEC only has three of its five commissioner slots filled. Republican nominee Hester Peirce and Democratic nominee Lisa Fairfax are awaiting Senate confirmation.

As she usually does when talking about fiduciary duty, Ms. White added her own caution that raising advice standards shouldn't limit “reasonably price, reliable advice.”

“You clearly want to have that … duty to investors raised,” she said. “You also need to be very cognizant of its impact. You want to make sure you're doing everything you can to preserve [widely available advice] with the rulemaking you do.”

OTHER SEC PRIORITIES

In her question-and-answer session with Maine Securities Administrator and NASAA President Judy Shaw, Ms. White also said the agency is moving ahead with reform of the standard for accredited investors, who can invest in risky nonregistered securities.

Currently, there are income and net-worth standards that determine who is a sophisticated investor. The SEC is considering changing the financial thresholds or adding new routes to accreditation, such as educational and professional background.

“Staff is working very hard on a recommendation,” Ms. White said. “It's important to land in the right place on this.”

The first woman to serve as the U.S. attorney for the Southern District of New York and the second to head the SEC, Ms. White also addressed the theme of diversity, which is running throughout the NASAA event.

“We need to work on increasing the number of women in high places in financial services,” Ms. White said.

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