SEC questions require answers
The SEC must be more transparent about its new questionnaire. What is the ultimate purpose? What justification is there?
The Securities and Exchange Commission, though claiming it is too underfunded to hire all the staff it needs to carry out all of its core responsibilities, suddenly is expending resources in an area that seems to belong to the Department of Labor.
As reported in this issue of InvestmentNews, the SEC has sent a 13-page questionnaire to investment advisers and brokers seeking information pertaining to the advice they give their clients about rollovers from 401(k) plans to individual retirement accounts, the fees they charge, conflicts of interest, and supervision and compliance controls.
One-third of the questions relate to situations in which the adviser or broker provides advice on qualified default investment alternatives. That is usually the province of the DOL, which has the responsibility to enforce the Employee Retirement Income Security Act.
The move prompts a number of questions. First, what is the SEC’s motive in sending out the questionnaire? Is it simply seeking to broaden its area of responsibility? Is it trying to build a case for an expanded role in the 401(k) arena and therefore a bigger staff?
Mission creep is not unknown in Washington, as an expanded mission usually justifies a bigger budget and more staff. Is the SEC’s current staff not busy enough? Given the agency’s constant complaints that it needs a bigger budget, that seems unlikely.
(Related read: Labor Department’s fiduciary rule survives challenge)
Does it believe the DOL is not doing a good enough job? If so, what is its evidence, and how is its effort designed to supplement the DOL’s effort?
MORE PAPERWORK
The SEC must be more transparent about its questionnaire. What is the ultimate purpose? What justification is there for imposing a 13-page, 75-question document on investment advisers and brokers? Investment advisers and broker-dealers have more than enough regulatory paperwork to do satisfying the DOL on IRA rollover matters, and the IRS, the SEC and Financial Industry Regulatory Authority Inc. on other matters, without the SEC adding another layer that overlaps with the DOL.
Regulators should bear in mind that all that information-seeking paperwork is not without cost to those required to fill it out. They should spare no attempt to minimize duplication of efforts. Every penny financial firms spend filling out government paperwork adds to the cost structure in the industry and must ultimately be recovered from clients.
Those clients include retirees and others saving for retirement, so that any unnecessary paperwork costs ultimately reduce retirement security.
It’s possible the SEC’s questionnaire is related to the fiduciary rule Congress gave it the authority to develop in the Dodd Frank financial reform law. But ERISA gave the Department of Labor and the Internal Revenue Service joint responsibility for overseeing retirement income plans. They have done so with reasonable effectiveness since 1974. There seems little reason for the SEC to butt in now.
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