Securities and Exchange Commission Chairman Mary Jo White would like her successor to continue an effort that she began — but could not complete — to raise the standard for retail investment advice.
In 2015, she came out in favor of a uniform fiduciary rule, which would mandate that all advisers act in the best interests of their clients — a bar that investment advisers already meet and a higher requirement than current broker rules.
Ms. White was unable to convince at least two other commissioners on the five-member panel to join her in introducing a rule. Then the agency lost two members, making the job harder.
She is departing the agency at noon on Friday, just as President-elect Donald Trump is sworn-in. That leaves a fiduciary rule in the hands of Mr. Trump's nominee for SEC chairman, Jay Clayton.
“I can't overstate the difficulty of doing a uniform fiduciary rule that's done well and doesn't have unintended consequences,” Ms. White said in an interview with InvestmentNews on Wednesday in a 10th-floor conference room at SEC headquarters in Washington overlooking the U.S. Capitol.
“That's the one thing I hope the new commission will carry forward,” Ms. White added. “It's not an easy road.”
During her tenure, there was a chasm on fiduciary duty. Former Democratic commissioner Luis Aguilar was a champion. Democratic commissioner Kara Stein didn't state a clear public position.
Current Republican member Michael Piwowar and former GOP member Daniel Gallagher Jr. expressed skepticism and said a rule must be justified by stringent cost-benefit analysis.
If it does propose a fiduciary rule, the agency has to follow parameters outlined by the Dodd-Frank financial reform law that accommodate many aspects of the brokerage model.
Mr. Clayton will have to weigh the challenges.
“He needs to first decide for himself that he does want to do it given the difficulty and complexities,” Ms. White said. “Then he needs to build support in the new full commission.”
She said the SEC should not be hamstrung by a Labor Department advice rule for retirement accounts that will be implemented beginning in April.
“We can do a coordinated rule with that rule,” she said.
When Ms. White departs on Friday, only Mr. Piwowar and Ms. Stein will remain on duty. Last year, the Senate failed to confirm Republican nominee Hester Peirce and Democrat Lisa Fairfax. Mr. Piwowar is expected to be acting chairman.
It likely will be weeks, if not months, before the Senate takes up Mr. Clayton's nomination.
“I'm very impressed by Jay Clayton,” said Ms. White, who spoke to him after he was named. “He's a smart, very principled, very nice guy. He's got people skills, which helps when you're building consensus.”
A proposal waiting for him is one that would allow independent examinations of investment advisers by private-sector organizations.
The idea is seen as a way to increase SEC oversight of the approximately 11,800 registered investment advisers. The agency examines about 12% of them annually.
“I believe in another commission it will move,” Ms. White said. “It's a very well-done proposal. It doesn't supplant [the SEC] but it would give us more information on advisers more frequently.”
The current three-person commission came to an impasse over the third-party exam rule. But Ms. White takes pride in more than 50 successful rulemakings — including those that reformed money market funds and modernized regulation of the asset management industry — as well as operational improvements.
“We've strengthened enforcement, we've strengthened the exam program,” said Ms. White, a former U.S. Attorney for the Southern District of New York who prosecuted crooked Wall Street executives as well as suspected terrorists.
For the lifelong Yankees fan, a high point of Ms. White's tenure was tossing the first pitch at a Washington Nationals game last August. She used skills taught to her by her older brother when they were children.
“The greatest pressure I've ever been under in my life was throwing out that first pitch,” Ms. White said.
She looks forward to a similar moment at a Yankees game this season. In the meantime, her photo has been added to those of her 30 predecessors as SEC chairman in the rooftop conference room.
She doesn't intend to retire, but she's not certain what she will do next.
“I will think about that Friday afternoon,” she said.