SEC to tackle fiduciary issue right off the bat, says official

‘We expect to move forward quickly,' says Robert Cook, director of the division of trading and markets'; single standard of care ahead?

Jul 15, 2010 @ 4:06 pm

By Mark Schoeff Jr.

One of the first studies mandated by the Dodd-Frank financial reform legislation will be the one of most interest to financial advisers — an examination of how regulation of advisers and brokers differs and whether a universal fiduciary standard should be imposed.

Robert Cook, director of the Securities and Exchange Commission's Division of Trading and Markets, said at a conference in New York today that the survey, designed to identify gaps and overlaps in the oversight of standards of care, would be a priority for the agency.

“We expect that to move forward quickly,” Mr. Cook said today at the Securities Industry and Financial Markets Association Regulatory Reform Summit.

(Blog: How quickly can the SEC move on the fiduciary study?)

Getting a jump on the study will help resolve the question that the Dodd-Frank bill, which was passed by the Senate 60-38 this afternoon, sidestepped by passing the fiduciary ball to the SEC. Although the regulatory agency was authorized to make rules imposing a universal standard, it can act only after the study is completed.

The 2,300-page reform measure, which touches on nearly every facet of the financial industry, contains more than 250 rulemakings and studies that must be conducted by federal agencies, according to a SIFMA analysis. The SEC alone has 124 actions it must take.

The clock will start ticking on many deadlines for the SEC once the legislation is signed into law by President Barack Obama.

The fiduciary duty study will require the SEC to examine 14 different dimensions of the issue, such as the differences in the frequency and length of exams between investment advisers and broker-dealers and what potential changes in the standard would do to costs and customer service. The SEC will hear testimony from representatives of the broker-dealer industry, financial advisers' groups and investors.

“The novelty, breadth and complexity of the issues before us exemplify why the public comment process is so important,” Mr. Cook said.

The study, which will involve advisers, broker-dealers and investors, will draw on many SEC resources. “An endeavor of this scale would be a commission-wide effort … that will mean an unprecedented amount of activity,” Mr. Cook said.

The agency has been girding for the increased workload, he said.

During the 18 months of her tenure as SEC chairman, Mary Schapiro has been directing SEC divisions and offices to collaborate and share information and expertise.

“Chairman Schapiro has made silo-breaking a high priority for the staff,” Mr. Cook said.


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