Compliance

SEC Chair Clayton’s Recent Fiduciary Comments Are Revealing

The SEC chair issued only a brief statement on his intention to work with DOL officials on reforming conflict of interest regulations—but his language is revealing.

By John Manganaro editors@assetinternational.com | June 02, 2017
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Back in mid-May the U.S. Department of Labor (DOL) confirmed that it will not seek to further delay the June 9, 2017, applicability date of the new fiduciary rule defining investment advice standards and establishing the best interest contract exemption (BICE) and other related exemptions under the Employee Retirement Income Security Act (ERISA).

As readers likely recall, a big part of the debate surrounding the crafting of the fiduciary rule—approved in the waning days of the Obama administration but left to his predecessor to fully implement—involved disagreement about whether the significant expansion of regulatory power for the DOL infringed on the proper jurisdiction of the Securities and Exchange Commission (SEC). There was particularly strong debate about whether it is appropriate that, under the fiduciary rule expansion, DOL gains strong policing powers over large swaths of the individual retirement account (IRA) rollover marketplace.

This week a fresh voice joined the discussion, that of the newly Trump-appointed SEC Chair Jay Clayton. In a brief public statement delivered June 1, Clayton “welcomes the Department of Labor's invitation to engage constructively as the Commission moves forward with its [own] examination of the standards of conduct applicable to investment advisers and broker-dealers, and related matters.”

Clayton’s comments continue: “I believe clarity and consistency—and, in areas overseen by more than one regulatory body, coordination—are key elements of effective oversight and regulation. We should have these elements in mind as we strive to best serve the interests of our nation's retail investors in this important area.”

He goes on to observe that the range of potential actions previously suggested to the Commission is broad and includes very diverse proposals, “from maintaining the existing regulatory structure, to requiring enhanced disclosures intended to mitigate reported investor confusion, to the development of a best interests standard of conduct for broker-dealers, and, finally, to pursuing a single standard of conduct combined with a harmonization of other rules and regulations applicable to both investment advisers and broker-dealers when they provide advice to retail investors—and a variety of points in-between.”

Clayton says he “believes an updated assessment of the current regulatory framework, the current state of the market for retail investment advice, and market trends is important to the Commission's ability to evaluate the range of potential regulatory actions.” He urges stakeholders with supportive and critical opinions on all these matters to share their thoughts via a webform and/or the designated email address: rule-comments@sec.gov.

NEXT: Reading the comments in context