Proposed Treasury Legislation Pushes Fiduciary Requirement

The U.S. Department of Treasury has delivered proposed legislation to Congress that would strengthen the Securities and Exchange Commission's (SEC) authority.

According to a Treasury Department fact sheet, the legislation outlines steps to establish consistent standards for all those who provide investment advice about securities, to improve the timing and the quality of disclosures, and to require accountability from securities professionals. The legislation would also establish a permanent Investor Advisory Committee to keep the voice of investors present at the SEC.

Significant to retirement plans, the legislation would give the SEC authority to require a fiduciary duty for any broker, dealer, or investment adviser who gives investment advice about securities, aligning the standards based on activity, instead of based on legal distinctions between investment adviser and broker-dealer that are no longer meaningful, the Department said. In addition, the SEC would be empowered to examine and ban forms of compensation that encourage financial intermediaries to steer investors into products that are profitable to the intermediary, but are not in the investors’ best interest.

In addition, the Department explained that under current law, an individual barred from being an investment adviser because of serious misconduct could still apply to become a broker-dealer. The legislation would give the SEC authority to remove regulated persons from all aspects of the securities industry rather than just a specific segment.

The SEC recently established an Investor Advisory Committee, made up of a diverse group of well-respected investors, to advise on the SEC’s regulatory priorities, including issues concerning new products, trading strategies, fee structures, and the effectiveness of disclosure. The Investor Advisory Committee would be made permanent by the proposed legislation.

The fact sheet is located here.