SEC Commissioner Hester Peirce wants fiduciary reform to preserve investor options

The Republican appointee wants to make sure there are a variety of payment models and levels of service

Mar 15, 2018 @ 2:19 pm

By Mark Schoeff Jr.

A new member of the Securities and Exchange Commission on Thursday said as the agency tackles investment-advice reform, she wants to make sure that investors can still turn to either an investment adviser or a broker for advice.

"It's very important to me that whatever we do, we maintain options for people," SEC commissioner Hester Peirce said at the Investment Adviser Association compliance conference in Washington. "I don't think every client wants the same thing. I want to make sure that we have a variety of payment models and a variety of levels of service."

She also said that she wants to clear up "investor confusion" and "help people to understand what the nature of their relationship is [with their adviser] and how they're paying for the service they're getting."

The SEC has said that it will propose a fiduciary rule for retail investment advice this year. It could come out as soon as the second quarter.

As part of that process, Ms. Peirce said that the agency would define what it means to act in the best interests of investors. Making that sometimes ethereal concept concrete is a challenge, according to Ms. Peirce.

"I still don't understand what it means because it means something different to everyone," she said. "I hope we can put some meat on the bones of what that might actually mean in practice."

When it does, it will help the SEC catch up with the Labor Department, whose own fiduciary rule pertaining to retirement accounts has been partially implemented but is currently undergoing a reassessment mandated by President Donald J. Trump that could lead to major changes in its remaining provisions.

The SEC rule also is likely to tackle the term "fiduciary," according to Ms. Peirce, a Republican appointee who was sworn in on Jan. 11 along with Democratic SEC member Robert Jackson Jr.

"There's a lot behind that word," she said. "To the extent that we need to put any guidance out to explain what we mean by that word, I'm open to it."

Ms. Peirce said that an SEC rule would likely involve sections pertaining to disclosure, clarifying the broker standard of care and "providing guidance" for investment advisers.

Currently, investment advisers must meet a fiduciary standard and act in the best interests of their clients. Brokers are held to a suitability standard that requires them to recommend investments that fit their clients' objectives and risk profiles. Under suitability, they can sell the products that give them the highest revenue.

Ms. Peirce said that she was open to adviser title reform, or clarifying "what [financial professionals] can and can't call themselves."

Brokers and advisers are likely to have to submit disclosure documents to their clients under the SEC rule, according to Karen Barr, IAA president and chief executive. In a Q&A with Ms. Peirce, Ms. Barr suggested that the agency do investor testing to figure out what kind of form works best.

"If it's a joint document, it needs to be neutral for broker-dealers and advisers," Ms. Barr said in an interview on the sidelines of the conference.

It's important for the agency to hear feedback on disclosure requirements and other issues after it releases its proposal, according to Ms. Peirce.

"Whatever we initially put out, we're going to need a lot of input," she said.

That input also will come from DOL and state securities and insurance regulators.

"I'm enthusiastic that we can do something that's much more coordinated" than the original DOL rulemaking process, Ms. Peirce said.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Regional brokerages are picking up assets, advisers from wirehouses

Senior columnist Bruce Kelly discusses with deputy editor Bob Hordt the impact of big brokerage houses pulling back on recruiting and regionals promising recruits less bureaucracy.

Latest news & opinion

UBS sues Ohio National over lost variable annuity commissions

Wirehouse joins handful of other firms seeking to prevent insurer from cutting off flow of adviser trails.

Regional broker-dealers quietly making comeback now, but the future remains uncertain

After a period of decline, the regional brokerage industry is scoring recruiting gains at the expense of wirehouses.

With stock market in a correction, is a recession just ahead?

Some say the market is overreacting to bad news — but what if it's not?

10 tips for hiring top young advisers

Hiring is not easy and retaining good employees can be even more difficult. Here's a roadmap for bringing on new advisers and training them — and even firing them, if necessary.

Kestra Financial latest broker-dealer to be put up for sale

The independent B-D's owner, Stone Point Capital, has tapped Goldman Sachs to lead the deal.

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