Brown said FSI is concerned that CARDS isn’t feasible for a number of reasons. “There’s no data standardization in this industry, so how do you gather all of that information uniformly in one database and accurately analyze and interpret it?” he asked.
“Another question is who pays the freight for it,” he added. “Our members already deal with tremendous regulatory, technology and data costs.”
Despite objections from FSI and others, Brown foresees this issue moving forward. “I think we’ll see another proposal on this in the next two to three months, and I think it’s possible by year-end we’ll see a rule to react to.”
Time To Modernize
Brown expressed his personal opinion that maybe it’s time to rethink the Securities Exchange Act of 1934 that regulates broker-dealers and the Investment Advisers Act of 1940 that regulates investment advisors.
“The opportunity we missed [during the debate over the Dodd-Frank Act] is we could’ve had Congress debate the modernization of the laws and rules governing our business because one of the biggest challenges the SEC faces is it’s regulating our industry with two laws written seven decades ago,” Brown said.
“I hope we can look at modernizing the laws to catch up with all of the innovation that’s happened in the marketplace to make it more like how you deliver advice every day to your clients,” he told advisors in the audience.
It’s not impossible that something of this magnitude could happen, Brown said, noting that a somewhat similar type effort occurred with the repeal of the Glass-Steagall Act in 1999 (though that has had mixed results).
That said, the political realities of modernizing the ’34 and ’40 Acts make it a very daunting—if not highly unlikely—endeavor.
“Probably the only thing that would get Congress to move on that is another crisis," Brown said. “But then the challenge would be trying to not end up with another Dodd-Frank that’s still being sorted out.”