While the development of a fiduciary standard for retail advisers and a possible self-regulatory organization for advisory firms may be on the back burner until after the elections, they still remain hot-button issues for advisers.
That was obvious Tuesday during a panel discussion at TD Ameritrade Inc.'s fall regional conference in Dana Point, Calif.
Attendees quickly began peppering panel members with questions and comments even before the moderator,
InvestmentNews reporter Mark Schoeff, opened up the discussion for questions.
Kevin Carroll, associate general counsel at the Securities Industry and Financial Markets Association, and Barbara Roper, head of investor protection at the Consumer Federation of America, butted heads early on in describing how a fiduciary standard might be applied when giving personalized investment advice under the Dodd-Frank financial reform law.
The brokerage industry, represented by SIFMA, wants specific rules. Mr. Carroll said the law allows parallel rules under the Investment Advisers Act of 1940, which governs advisers, and the Securities Exchange Act of 1934, which covers brokers.
“Maybe you can have specific rules under the '34 Act” for brokers, he said, and a principles-based regime for advisers, both requiring a fiduciary standard of some sort when giving advice to investors.
Ms. Roper disagreed. “A fiduciary duty is inherently principles-based,” she said. “You can't define it down to a set of rules.”
Echoing Ms. Roper, one of the attendees warned of advisers' being hit with the “ungodly” amount of rules now covering broker-dealers.
David Tittsworth, executive director of the Investment Adviser Association, offered only slight reassurance in predicting that a single fiduciary standard likely would encompass both hard rules and broader principles of conduct.
On the issue of an adviser SRO, Mr. Carroll repeated SIFMA's support for the idea, noting that such a regulator would not necessarily have to be the
Financial Industry Regulatory Authority Inc.
“Our view is that an SRO … will be a more cost-efficient solution” than the other option being debated, which is having the SEC charge user fees to pay for more examiners, he said.
“I think [the issue] will come down to the value between those two options,” Mr. Carroll said, adding that an SRO would stand a better chance of increasing exam frequency.
But the issue “isn't just a numbers game” Mr. Tittsworth countered.
If exam frequency is the only factor that matters, “the regulator who inspects more is the best,” he said. “But I don't buy that … There have been some astounding failures of broker-dealers” who supposedly get examined every two years.
“For the SEC to expand what it's doing now would obviously be cheaper than turning over [adviser exams] to Finra,” Mr. Tittsworth said.
