Fiduciary Standard Lobbying Season
First came this summer's Dodd-Frank Wall Street Reform and Consumer Protection Act which mandated the SEC to undertake a six-month study of the obligations and standards of care of broker-dealers and investment advisors who provide personalized investment advice about securities to retail investors.
Then came the one-month public comment period that ended in late August when more than 3,000 people put in their two cents to the SEC on where they stood on the issue--whether it be the pro-fiduciary standard espoused by investment advisors; the pro-suitability standard favored by broker-dealers and the insurance industry; or a so-called fiduciary "lite"standard that waters down the current standard governing investment advisors.
And now it's time to wait--and lobby--as the SEC studies the issue into the new year.
When the study period ends in late January, the SEC will likely be poised to do something. As stipulated by Congress, the agency will have the authority to write rules that would create a uniform standard of conduct for anyone who dispenses financial advice to individual investors. And the law says this standard must be "no less stringent" than the standard currently applicable to investment advisors.
SEC Chairman Mary Schapiro says she favors a uniform fiduciary standard. So does FINRA Chairman and CEO Rick Ketchum. SIFMA president and CEO Tim Ryan has called for a "universal standard of care that avoids the use of labels that tend to confuse the investing public."
What exactly does all of that mean? Who knows, which is why leading membership organizations with skin in the game will maintain their lobbying efforts and keep their public relations machines humming in the coming months.
"Our organization, like others involved in this issue, will seek to educate and influence the SEC as they conduct their study," says David Bellaire, general counsel at the Financial Services Institute, which represents independent broker-dealers and financial advisors. FSI opposes imposing the fiduciary standard that governs RIAs on the entire advisory industry.
"We want a standard that works for all business models and doesn't advantage or disadvantage one business model over another," Bellaire says.
Says Barbara Roper, director of investor protection at the Consumer Federation of America, "I've let the SEC know they should expect to hear from me early and often."
Roper, a proponent of the fiduciary standard, says there are a couple of rounds left to go on this issue. "The SEC will have to report to Congress, so we'll have something to say on the report when it's done, as well as on some of the things industry members will put forward we think are incorrect," she says.