Dodd-Frank Act's 5th anniversary: What's been done, what's left to do

In the five years since President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, officially making it a federal law, regulators have not yet fully implemented the legislation — and whether it will ever be completed is still up in the air. Only eight out of the almost 400 rules in the law, which Congress passed after the 2008 financial crisis to seek transparency across the financial-services industry, mention financial advisers specifically and impact them directly. Some of the bill's provisions have been adopted, but others have not, due in part to the fact that they were not mandatory. Two of the more significant Dodd-Frank suggestions — the adoption of a new self-regulatory organization to oversee advisers and defining advisers' fiduciary duty — have not yet come to fruition. "We haven't seen the key part of the law that would affect financial advisers, which is the uniform fiduciary standard," said Duane Thompson, senior policy analyst at Fiduciary 360, an economics research firm. He expects to see a proposal by the Securities and Exchange Commission and Chairwoman Mary Jo White in the next year and a half. He also said the Labor Department's proposal for a fiduciary standard in retirement accounts does not technically count toward the Dodd-Frank rule. Ron Rhoades, assistant professor of finance at Western Kentucky University and an advocate for the fiduciary standard, disagreed, saying that, once it passed, a DOL fiduciary standard could stretch across the industry. "The SEC had other priorities and stalled on their effort," Mr. Rhoades said. "The DOL rulemaking is really setting the pace of that evolution."

Fifth anniversary of Dodd-Frank Act. Financial reform that never happened in the right areas.

— Dennis K. O'Brien (@denniskobrien) July 17, 2015

There's still a ways to go in implementing Dodd-Frank's provisions. Of the 390 rulemaking requirements set forth by the law, 63.3% have been satisfied with finalized rules, while 15.4% more rules have been proposed. The last 21.3% of rules have not yet been proposed, according to a report by Davis Polk & Wardwell. ADVISER-FOCUSED RULES IN PLACE Some of the Dodd-Frank rules that affect advisers and broker-dealers have already been implemented, including one requiring private fund advisers to register with the SEC, as well as another shifting small and mid-size advisers to become state regulators' responsibility. Within a year of the legislation passing, hedge funds and private-equity firms were registering with the SEC. Within two years, the SEC required mid-sized advisers with assets under management between $25 and $100 million to amend their ADV forms to state they were no longer eligible to remain registered with the commission. Instead, they were forced to switch to a state regulator, decreasing the number of advisers registered with the SEC by 10% but increasing the total number of assets under management by 13% as the average AUM increases. Another rule that was passed raised the minimum net-worth requirement of an investor for which an adviser can charge a performance-based fee.

#womensforum2015 Schapiro: "The Dodd-Frank law drives a lot of people crazy, and I get that. But we have a lot that's really great."

— Marion Asnes (@marionasnes) June 23, 2015

And yet, some of the most significant rules have been held up indefinitely. There has been a debate since Dodd-Frank began rolling out about whether or not there needs to be a new self-regulatory organization to enforce Dodd-Frank requirements and do more adviser examinations. Currently, the SEC examines about 10% of the 11,500 registered investment advisers from around the country every year. Suggestions include allowing the SEC to charge a user fee to conduct exams, establishing a new SRO or allowing the Financial Industry Regulatory Authority Inc. to step in and take over jurisdiction of adviser examinations. "There's no real progress," said Thomas Gorman, a partner at Dorsey and Whitney, referring to the SRO debate. "I think many advisers, particularly the smaller ones, are content with the way the SEC is conducting the examinations." LITTLE CONFIDENCE Mr. Rhoades said he doesn't have much hope that there will be significant progress in the near future. Mandatory initiatives can be delayed, and suggestions could be avoided completely. "You have some optional rulemakings by the SEC, such as the fiduciary standard, where the SEC has a history of making proposals but not acting on them," Mr. Rhoades said. "I don't have a great deal of confidence that the SEC is able — with its current staff — to implement a whole new set of rules that are consumer-friendly," he said.