(Bloomberg News) Even with Wall Street and consumer advocates allied in pushing for it, a U.S. Securities and Exchange Commission proposal to raise standards for brokers advising retail investors has run aground.

The SEC, which has been drafting a rule for almost two years, has scheduled no action on the measure as 2012 wanes and a presidential election approaches.

SEC Chairman Mary Schapiro, who pushed to include the measure in the Dodd-Frank Act to ensure clients receive equal treatment from brokers and investment advisors, said other rules will probably take precedence in coming months.
"It's important for us to get this done, but Congress handed us a lot of important things to do," Schapiro said in an interview. "We continue to advance this issue within the building and remain committed to it."

Dodd-Frank, the financial-regulation overhaul enacted in response to the 2008 credit crisis, instructed the SEC to consider mandating that brokers operate under a fiduciary standard as rigorous as that for investment advisors. Lawmakers sought the uniform standard to eliminate investor confusion over the roles of brokers and advisors, and to protect customers from being overcharged or sold inappropriate products.

Barbara Roper, director of investor protection for the Washington-based Consumer Federation of America, said there's rare common ground between Wall Street and consumer advocates on the need for the rule.

"It's hard to imagine how they could possibly get from where they are to a final rule in the remainder of this year," Roper said of the SEC. "It shouldn't have been this hard."

Schapiro declined to predict when the SEC will act on the rule, which is considered optional under Dodd-Frank. The agency is "steadily working through all the mandated rulemakings," she said.

Because it's not required, the rule could be dropped completely if Republican challenger Mitt Romney defeats President Barack Obama and installs a new SEC chairman.

Schapiro, facing pressure from those who want the change, met with a group of advocates including John Bogle, founder of mutual fund company Vanguard Group Inc. The group presented a "fiduciary declaration" signed by past regulators such as former FDIC Chairman Sheila Bair, former Federal Reserve Chairman Paul Volcker and Arthur Levitt, a former SEC chairman.

Retail investors typically put their money in the hands of broker-dealers or investment advisors. Brokers earn commissions on sales and work under a professional standard that requires them to promote products "suitable" for clients. Registered investment advisers work for set fees and manage portfolios under a standard that their advice be in customers' "best interests."

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