Dalia Blass could tackle fiduciary standard as first order of business at SEC

She is also expected to set the agenda for ETFs, an area in which she has expertise from her previous time at the SEC

Sep 6, 2017 @ 12:01 am

By Mark Schoeff Jr.

Dalia Blass' first order of business as head of the Securities and Exchange Commission's Division of Investment Management could be to shape the agency's position on a fiduciary standard.

"I'm going to be surprised if that's not the first order of business — getting the SEC back in charge of the fiduciary rule," said Norm Champ, a partner at Kirkland & Ellis and a former investment division director. "She's very qualified to get that done and would have a lot of influence on how it's done," said Mr. Champ, who is the author of "Going Public" (McGraw-Hill, 2017), a book about his SEC tenure.

Ms. Blass, 45, was appointed to the post last week. She returns to the agency, where she worked for about a decade in the division before leaving in 2016 for the securities law firm Ropes & Gray.

Ms. Blass declined to be interviewed for this story.

The Labor Department is reviewing its fiduciary rule, which would require brokers to act in the best interests of their clients in retirement accounts. SEC Chairman Jay Clayton issued a request for comment in June regarding a potential similar SEC regulation.

Karen Barr, president and chief executive of the Investment Adviser Association, said that Ms. Blass' views on fiduciary duty weren't apparent in her previous SEC work. But Ms. Barr is hopeful about Ms. Blass' leadership.

"She's smart. She's knowledgeable about the industry," Ms. Barr said. "She understands a wide-range of perspectives."

Ms. Blass has the chops to navigate a controversial rulemaking like fiduciary duty, according to Tyler Gellasch, executive director of the Healthy Markets Association and a former counsel to SEC Commissioner Kara Stein.

"Directing the staff is only part of the job; it's also about working with the commissioners to find consensus," Mr. Gellasch said.

Immediatley before she left the SEC, Ms. Blass had been working on exchange traded funds, and that is likely to be another area of focus for her now that she is back.

"We have someone in Ms. Blass who understands the ETF business very well. That's a good thing," said Dave Nadig, chief executive of ETF.com, which produces ETF rankings and data. "With the changing of the guard at the SEC, we could see a more comprehensive approach to regulation of exchange-traded funds."

One big ETF issue awaiting Ms. Blass is a decision on whether to approve the registration of eight new ETFs by Precidian Investments. The actively managed funds would report their holdings once a quarter rather than every day.

"That could fundamentally change how retail investors invest in the markets," said Mr. Gellasch. "You could have a real significant change in how we think actively managed funds should look. It will be interesting to see how she addresses the risks that come with a lack of transparency in funds that are traded in real time."

Ms. Blass also could speed up SEC consideration of the so-called plain-vanilla ETF rule, which would make it easier for new actively managed ETFs that are based on indexes to get approval.

"With her exemptive background, she'd be perfect for something like that," said Mr. Champ. "That gives the SEC something deregulatory."

Working at the SEC has become a family affair for Ms. Blass. Her husband, David, also had two tours of duty at the SEC. He is a former general counsel at the Investment Company Institute, which represents the fund industry. His departure from ICI earlier this year was seen as a necessary step to avoid a conflict of interest for Ms. Blass in her new role at the agency.

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