Securities and Exchange Commission member Robert Jackson Jr. urged his colleagues to approve an advice reform rule across party lines so that it can withstand court challenges.
"Fundamentally, this can and should be a bipartisan effort of the commission," Mr. Jackson said Monday at the
Practising Law Institute's SEC Speaks conference in Washington.
Mr. Jackson is currently the lone commissioner selected by congressional Democrats. The other three members, including Chairman Jay Clayton, were chosen by Republicans.
Last week,
Allison H. Lee was nominated to be the fifth SEC commissioner. She would hold a Democratic seat if confirmed by the Senate, which would put the agency at full strength with five members.
Political unity is necessary on a final advice rule for it to hold up to legal scrutiny, Mr. Jackson said.
"A rule like this is going to be long litigated, not just in the [U.S.] D.C. Circuit [Court of Appeals] but in the marketplace for years," he said. "This is a unique moment in which we can and should speak with one voice."
The chances for a lawsuit over the advice rule increased recently when a group of
former SEC chief economists submitted a comment letter questioning the quality of the economic and regulatory impact analysis done on the proposed rule.
Mr. Clayton didn't seem worried on Monday about such criticism.
"I'm very confident that the economic analysis that will accompany a final rule in this space will be robust," Mr. Clayton told reporters on the sidelines of the PLI conference.
He was less clear about whether he would delay a vote on a final rule until Ms. Lee is confirmed by the Senate. Most observers are expecting a vote this summer.
"In my time at the commission, I think we've had five different configurations of the commission," Mr. Clayton said. "Who knows?"
It could take the Senate several weeks — or even a couple of months — to confirm Ms. Lee.
"We always benefit from broader views on the commission," Mr. Jackson told reporters on the sidelines of the conference. "But I don't set the agenda, and I am aware of the fact that there are those who would like to proceed with the personnel we have at the moment."
In order to secure Mr. Jackson's vote for a final rule, he said some revisions would have to be made to its centerpiece, Regulation Best Interest. The measure would prohibit brokers from putting their own interests ahead of their clients' interests.
Mr. Jackson said the rule should clarify that brokers should put their clients' interests first, and limit or ban compensation practices that can cause conflicts of interest.
"There are significant changes we should make to this proposal before it goes final," he said.
In his remarks, Mr. Clayton didn't say whether the final Regulation Best Interest would change significantly from the proposal. As he usually does, he
emphasized his overall goal with the rule, which would regulate investment advisers and brokers separately — with advisers continuing to adhere to fiduciary duty.
"The standards of conduct should reflect what retail investors would reasonably expect from these types of financial professionals, while preserving investor choice" in the type of financial adviser they hire, the scope of services and how they pay for them, Mr. Clayton said.
