Securities and Exchange Commission Chairman Mary Jo White is poised to reveal what she believes is the best way for the agency to address the issue of raising investment-advice standards for brokers.
“The commission has not made a decision whether to do something or what to do,” Ms. White said Monday at the Securities Industry and Financial Markets Association annual meeting in New York. “But in the short-term, there will be more clarity on that in terms of my own position.”
Ms. White has not said whether she supports writing a rule or enhancing disclosures related to investment-advice standard of care. She has played her cards close to her vest in part because the controversial issue has
divided the five-member commission.
“It is quite complex,” Ms. White said. “It's [an issue] that I'm very committed to as a very high priority. We're working on it quite intensively.”
She added that both the “whether to” and the “how to” questions are difficult for the SEC to wrestle to the ground.
For more than four years, the SEC has been mulling whether to propose a rule that would establish a uniform fiduciary duty for retail investment advice, which would require brokers to act in the best interests of their clients. Investment advisers already meet this bar, while brokers adhere to a suitability standard that allows them to sell high-fee products to their clients as long as they meet the clients' investment needs.
The Dodd-Frank financial reform law gave the SEC the authority to promulgate a fiduciary-duty standard but did not mandate such a move. Ms. White has said that the agency
will make a determination this year on proposing a rule or taking another approach.
One fiduciary-duty advocate said he hopes that the SEC is ready to act after years of deliberation.
“Perhaps she's going to put her stake in the ground as to where she as chair stands on this issue as a way to get the commission moving forward,” said Skip Schweiss, managing director of adviser advocacy at TD Ameritrade Institutional, on the sidelines of the SIFMA conference.
SIFMA has long espoused its support of a fiduciary-duty standard for investment advice, but it has cautioned the SEC not to foist on brokers the Investment Adviser Act of 1940 standard that governs investment advisers. Brokers adhere to a 1934 securities law.
“We think there should be a uniform standard,” SIFMA President and chief executive Kenneth E. Bentsen Jr. said at the conference. “We think you can do it under both the 34 Act and the 40 Act. You can do it in parallel rulemaking.”
Such an approach makes some fiduciary-duty backers worry that it could water down the current standard. Mr. Schweiss is optimistic about working with SIFMA on the issue.
“I think they can be an ally,” he said. “It's how you get there that tends to be more difficult.”
In a questions-and-answer session with the SIFMA audience, Ms. White said that the change in composition of Congress following last week's election will not cause the agency to change its strategy for
trying to get more funding. The agency plans to increase the oversight of investment advisers if given a bigger appropriation.
In last week's election, Republicans, who are skeptical of increasing the SEC budget, took over the Senate and increased their House majority.
“I don't see a different approach from our end there,” Ms. White said.
