Clayton says SEC can't simply take over DOL fiduciary rule

'We have a process. They have a process. We have to respect those,' chairman tells SIFMA annual conference

Oct 24, 2017 @ 2:00 pm

By Mark Schoeff Jr.

Industry opponents of the Labor Department's fiduciary rule want the Securities and Exchange Commission to swoop in and take over rulemaking on investment advice standards, but the agency can't simply stop the DOL regulation, SEC Chairman Jay Clayton said Tuesday.

"They have their process. We have our process. We have to respect those," Mr. Clayton said at the Securities Industry and Financial Markets Association annual conference in Washington. "We have the authority and the expertise to be leaders in this space. The DOL has a responsibility. States have a responsibility. We need to cooperate."

Part of the DOL rule, which requires brokers to act in the best interests of their clients in retirement accounts, became applicable in June. The agency is now reassessing the enforcement mechanisms of the measure in a review order by President Donald J. Trump that could lead to major revisions.

When Mr. Trump put the DOL rule in limbo, critics of the rule hoped the SEC would jump into the void and wrest control of the issue from DOL. Under Mr. Clayton, the SEC has issued a request for comment on fiduciary duty. The agency also has begun to draft a rule, he recently told lawmakers.

But the SEC can't simply supersede the DOL. The two agencies operate under different statutes, the federal retirement law for the DOL and federal securities law for the SEC. That means that each can take its own approach to fiduciary duty.

"We try to be mindful of each other, and, hopefully, it ends up in a place that is satisfactory," Mr. Clayton told reporters on the sidelines of the SIFMA conference.

Critics of the DOL rule say it is too complex and costly and will price investors with modest assets out of the advice market. Supporters of the rule say it mitigates broker conflicts of interest that result in the sales of inappropriate high-fee products that erode savings.

Mr. Clayton reiterated that his goal is to produce a fiduciary rule that preserves investors' choice in the type of financial adviser with whom they work — either an investment adviser or a broker. He said there won't likely be a regulation that favors a particular type of model.

"The idea that there's a silver bullet — one account type, one relationship type — that solves all of this is not something to pursue," he said. "You can't deliver everything that everyone would want in that way."

He made it sound as if the SEC has a long road ahead to reach its fiduciary destination.

"We have a lot of comments to work our way through, a lot of perspectives," he told reporters.

The SEC was given authority by the Dodd-Frank financial reform law to promulgate an investment advice regulation, but has failed to do so because of sharp differences on the issue among the agency's normal complement of five members. Currently, the SEC has two vacancies.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

The bizarro world of DOL and SEC rule supporters

Managing editor Christina Nelson talks with senior reporter Mark Schoeff Jr. about why groups that supported the Labor Department's fiduciary rule oppose much of the SEC advice package, and vice versa.

Latest news & opinion

10 most affordable U.S. cities for renters

Here are the U.S. cities that are most affordable for renters, according to Business Student.com, which compared the cost of rent to average salaries.

9 best - new - financial adviser jokes

Scroll through for nine new financial adviser laughs.

Captrust, prominent 401(k) advice firm, ramps up its wealth management business

Captrust wants to grow annual revenue from wealth management to 50% from 30% over the next five years.

Fidelity CEO says zero-fee funds aimed at expanding its universe

Johnson says way to prosper in financial services is 'by building relationships.'

SEC advice rule contains a huge hole

Jay Clayton aims to clear up investor confusion by drawing a distinction between brokers and advisers in the agency's proposed package of revised standards. But where do dual registrants fit?

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print