Fiduciary rule will top agenda for new head of SEC's Division of Investment Management

David Grim steps down after two-decade career at agency; new leader has not been named

Aug 3, 2017 @ 2:25 pm

By Mark Schoeff Jr.

Leadership of the Securities and Exchange Commission's division that writes rules governing investment advisers is changing hands, as the agency renews its effort to raise advice standards.

The SEC announced on Thursday that the director of the Division of Investment Management, David W. Grim, is leaving in September after working at the agency for most of his 20-year-plus career. Mr. Grim is the last of the division heads appointed by former SEC Chairman Mary Jo White to depart.

The agency has not announced Mr. Grim's successor.

The Wall Street Journal reported in June that his likely replacement is Dalia Blass, counsel at Ropes & Gray and a former senior SEC Investment Management official. Ms. Blass' husband, David, recently stepped down as general counsel at the Investment Company Institute to join the law firm Simpson, Thacher & Bartlett, a move that was seen as a predicate to Ms. Blass' appointment. Neither of the Blasses responded to a request for comment.

The division regulates investment advisers, investment companies, including mutual funds and exchange-traded funds, and variable insurance products. When SEC Chairman Jay Clayton released a request for comment on fiduciary duty in June a few weeks after he took the agency helm, it put the issue at the top of the division's agenda. The SEC is trying to catch up with the Labor Department's fiduciary rule, which was partially implemented in June and is undergoing a review that could lead to changes in the measure.

"The new IM director is going to have a tremendous amount of influence, along with the director of trading and markets," said Duane Thompson, senior policy analyst for Fi360, a fiduciary training and credentialing firm. "They will be getting into the nitty gritty of what a fiduciary standard should look like."

Trading and markets is the division that oversees brokers and likely will collaborate with the Investment Management division on an advice rule.

"The division director in investment management needs to assert his or her influence and make sure expertise about fiduciary duty is heard and understood in other divisions, particularly trading and markets," said Karen Barr, president and chief executive of the Investment Adviser Association.

The SEC was given authority by the Dodd-Frank financial reform law to propose a uniform fiduciary-duty rule but has not acted amid disagreement among commissioners.

"Many people on the staff, including me, have spent a number of years trying to move that issue in the right direction for investors," Mr. Grim, 47, said in an interview. "We've taken a lot of steps we're proud [of]. Based on what I've experienced, the folks here are going to continue to carry it forward and do the right thing."

Regulation of ETFs may get a boost, if Ms. Blass takes over the division. While at the SEC, she helped determine exemptive relief for new ETFs.

"The plain vanilla ETF rule is on the SEC's published agenda," said Norm Champ, a partner at Kirkland & Ellis and a former SEC Investment Management director. "If Dalia Blass is the next director, I see that rule as one that would take advantage of her tremendous expertise on ETFs. The rule is about cost-saving, promoting innovation and aiding capital formation. Those are the hallmarks of a Republican administration."

Ms. Barr wants the division to review and reform existing rules.

"The custody rule is a mess," Ms. Barr said. "It's overly complex. It's difficult to implement."

Mr. Grim, who joined the SEC in 1995 and has served as a staff attorney, assistant chief counsel and deputy Investment Management director, said that the approximately 4,600 SEC staff are at the heart of the agency. They're the ones who look out for investors like his 104-year-old Aunt Millie, he said.

"Twenty-two years ago, I rolled in here straight out of law school and have had amazing opportunities and experiences," Mr. Grim said. "You come to work every day to do what is best for investors, to work on behalf of people like her. It doesn't get any better than that."

Mr. Grim said he would spend time with his wife and three children before deciding on his next career move.

"This is my own decision," he said. "It's time to give something else a try."


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