Washington INsider

Washington INsiderblog

Mark Schoeff Jr. looks at what's really happening on Capitol Hill - and the upshot for advisers.

May 3, 2018, 2:58 PM EST

As curtains close on DOL fiduciary rule, SEC advice rule takes center stage


By Mark Schoeff Jr.

It's appropriate that the likely demise of the Labor Department's fiduciary rule occurred during the same week that Tony Award nominations were announced.A day after the productions and performers competing for Broadway's top honors were revealed, the 5th Circuit Court of Appeals denied efforts by AARP and three states to defend the DOL regulation in court. Just like that, the DOL is likely to relinquish its long-running lead-actor status in investment-advice reform and be relegated to a supporting role — or maybe even the chorus. When the Department of Justice, acting on behalf of the DOL, failed to appeal the March 15 split decision by a 5th Circuit panel to vacate the rule, it was up to the outside intervenors to save the rule. It looks as if they've failed to do so. Even more unlikely is a DOJ appeal to the Supreme Court, which must be filed by June 13.Now attention turns to the Securities and Exchange Commission, which... Read full post

Apr 17, 2018, 12:11 PM EST

SEC advice proposal unveiling: Here's what to expect


By Mark Schoeff Jr.

After many years of study and internal debate, the Securities and Exchange Commission is set to make a momentous advance Wednesday in setting investment advice standards. The five-member SEC is scheduled to vote Wednesday afternoon on whether to propose a rule package consisting of a disclosure document for registered investment advisers and brokers that summarizes their relationship with investors, a rule that sets a broker advice standard, and an "interpretation" of the standard of conduct for investment advisers.The fact that the package will see the light of day marks a significant milestone for an agency that has been wrestling with the advice issue for decades, and was given authority to propose a rule nearly eight years ago by the Dodd-Frank financial reform law. "Chairman Clayton is poised to do what none of his predecessors has done, which is get a proposal out the door," said Barbara Roper, director of investor protection at... Read full post

Apr 10, 2018, 3:00 PM EST

'Best interests' and 'fiduciary' aren't the same, so which will the SEC choose?


By Mark Schoeff Jr.

We're now into the second quarter of the year, and everyone involved in the debate over investment advice standards is eagerly awaiting the Securities and Exchange Commission's fiduciary rule proposal.Oops. Like Britney Spears, I did it again. I referred to the pending SEC rule using the term "fiduciary." As sources have pointed out to me, the SEC proposal may not emphasize that word — or even mention it much.Part of the definition of "fiduciary" is to be legally bound to act in another person's "best interests." But the SEC proposal could hinge on how the agency defines best interests."That's the $1 million question," said Knut Rostad, president of the Institute for the Fiduciary Standard. Investment advisers are currently held to a fiduciary standard of care, while registered representatives must adhere to a suitability standard. The latter requires that investment products meet the objectives and risk tolerance of a customer, ... Read full post

Nov 6, 2017, 2:48 PM EST

Finra reform getting traction in Washington


By Mark Schoeff Jr.

In a Washington dominated by partisan battles over health care and tax reform, something much lower profile but perhaps more important to brokers may be gaining momentum: Finra reform.The Financial Industry Regulatory Authority Inc., the industry-funded broker-dealer self-regulatory organization, is getting a fair amount of attention in the capital, according to David Burton, senior fellow in economic policy at The Heritage Foundation. A recent House oversight hearing addressed interest in Finra reform, as did the Securities and Exchange Commission nominees at their Oct. 24 hearing. Mr. Burton, a leading Finra critic, has himself has kept a spotlight on Finra by hosting an event with Finra president and chief executive Robert Cook on Oct. 6 and an event on Nov. 3 featuring think tank experts, industry and investor advocates."Finra is much more on people's radar than it has ever been in the past," Mr. Burton said at the Nov. 3 Heritage... Read full post

Oct 23, 2017, 4:51 PM EST

Finra's fine money whets appetites of investor advocates, experts, industry representatives


By Mark Schoeff Jr.

The $176.3 million in total fines Finra levied last year has mouths watering like a succulent burger coming off the grill. Investor advocates, members of Congress, scholars and industry representatives all want to take a bite.In the last couple of months, Finra has been pressed regarding what it does with fine proceeds. The industry-funded broker-dealer regulator's opacity in this area was highlighted in September in an in-depth InvestmentNews analysis of the Financial Industry Regulatory Authority Inc. Then it was brought up by lawmakers at a Finra oversight hearing conducting by a House Financial Services subcommittee. The topic also was raised earlier this month in an event at the Heritage Foundation featuring Finra president and chief executive Robert W. Cook.Not only is there an expanding chorus calling on Finra to better explain how it allocates its fine money, there also is a growing wish list of what it should do with its take.... Read full post

Jul 14, 2017, 1:48 PM EST

Best interest is in the eye of the beholder in debate over DOL fiduciary rule

regulation-money-bill main

By Mark Schoeff Jr.

The term "best interest" is subjective it seems in the debate over the Labor Department's fiduciary rule. The phrase is used by both critics and supporters of the measure to describe what they're trying to do for the average investor.The latest example of the fluidity of the term was seen in a July 13 hearing of the House Financial Services Subcommittee on Capital Markets, Securities and Investments. Lawmakers on the panel debated draft legislation offered by Rep. Ann Wagner, R-Mo., that would kill the DOL rule and replace it with a regulation written by the Securities and Exchange Commission that would "establish standards of conduct for brokers and dealers that are in the best interest of their retail customers," according to the preamble of the measure. But wait, in my reporting on the partially implemented DOL rule, I've always described the regulation as "requiring financial advisers to act in the best interests of their clients... Read full post

Jun 1, 2017, 4:20 PM EST

As fiduciary debate slogs on, both sides will be dragged through the mud


By Mark Schoeff Jr.

The endless debate over investment-advice standards will continue through at least the end of the year, thanks to the Labor Department's review of its fiduciary rule. As the conflict slogs ahead, an industry leader and some advisers worry that both sides will be dragged through the mud.Along the way, we'll have the umpteenth round of the fight over who is looking out for "Main Street" and who is doing the bidding of "Wall Street." That's a schism that concerns Blaine Aikin, executive chairman of Fi360, a fiduciary training and credentialing firm.He agreed with the Obama administration's efforts to couch the rule as helping Main Street investors because it helped get it across the finish line to finalization last year. But that effort came with a cost."In order to get the rule through, that's a strong card to play," Mr. Aikin said at Fi360's annual conference last month in Nashville. "But it does hurt our reputation. It does damage to... Read full post

May 8, 2017, 10:21 AM EST

Opponents of DOL fiduciary rule want SEC to modify suitability standard

SEC seal

By Mark Schoeff Jr.

Some suspense surrounds the fate of the Department of Labor fiduciary rule. Among the cliffhangers: Will new Labor Secretary Alexander Acosta extend the delay of the regulation's implementation date beyond June 9? What part of the rule will be modified as a result of the reassessment called for by President Donald J. Trump? Or will it be repealed altogether? If it is repealed, will the Securities and Exchange Commission step into the void and propose its own uniform fiduciary rule for retail investment advice?Here's a question that's not so suspenseful: What kind of new fiduciary standard is on the wish list of industry opponents of the DOL rule? Spoiler alert: They don't want one. They want a modification of the suitability standard that governs brokers' sales of investment products, and they want it to focus on disclosure.The Investment Company Institute, which represents the mutual fund industry, is the latest trade association to... Read full post

Apr 28, 2017, 2:55 PM EST

The SEC would have to jump through hoops to get approval for its own fiduciary rule


By Mark Schoeff Jr.

Republican lawmakers and financial industry opponents of the Labor Department's fiduciary rule repeatedly say — almost like a mantra — that the Securities and Exchange Commission is the place where such a regulation should originate.The DOL rule, whose implementation has been delayed until June 9, would require financial advisers to act in the best interests of their clients in retirement accounts. But the SEC has jurisdiction over securities regulation, and if it sets advice standards, they would apply to all retail investment accounts, DOL-rule foes argue.Their preferred starting place for a fiduciary rule would be codified in the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act, a nearly 600-page bill that would overhaul the Dodd-Frank financial reform law. The measure, written by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, likely will be approved... Read full post

Feb 27, 2017, 2:39 PM EST

Fate of fiduciary rule rides on regulators' political savvy


By Mark Schoeff Jr.

Politics and policy are inextricably linked in Washington. The former is always required to make any substantive advances in the latter. Regulation of financial advice is primary example — and two recent developments show why.On Friday, Securities and Exchange Commission Acting Chairman Michael Piwowar made his first major address while serving in his temporary position. A former Republican aide on the Senate Banking Committee, Mr. Piwowar showed that he has a pretty good grasp of politics.First, the theme of his speech was the "forgotten investor." The term is a variation the "forgotten man and woman" to whom President Donald Trump refers frequently when framing his governing approach. Using the "forgotten investor" trope helped tie Mr. Piwowar's vision for the SEC to the new Republican administration. My guess is that's what Mr. Piwowar intended. Despite the ephemeral nature of his "acting" title, Mr. Piwowar has taken action... Read full post

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