The expected announcement of a Securities and Exchange Commission fiduciary rule, combined with the revised Department of Labor rule and a variety of state-level legislation, could lead to serious compliance issues, according to ThinkAdvisor.
Fiduciary Rule Making Faces a Variety of Problems
Two SEC commissioners were sworn in at the start of the year and two more are set to leave, which could cause problems for fiduciary rulemaking, Barbara Roper of the Consumer Federation of America tells the publication. SEC Chairman Jay Clayton has done well to bring together the commissioners, which has been made easier by the existence of a DOL rule and political pressure, Roper tells ThinkAdvisor.
The historic failure to present a fiduciary rule, coordinating with the DOL and complying with Section 913 of the Dodd-Frank Act makes SEC rulemaking difficult, David Tittsworth, counsel with Ropes & Gray, tells the publication. Section 913 was a compromise between conflicting groups, so creating a uniform rule under it for both advisors and brokers could be difficult, Tittsworth tells ThinkAdvisor.
It is unlikely that an SEC rule would be modeled on the DOL rule considering the negative rhetoric of the current administration, Roper tells ThinkAdvisor. Furthermore, Roper hopes that Democrats would reject any SEC proposal that relied on disclosure to avoid conflict of interest, the publication writes.
Clayton believes that states can contribute to fiduciary regulation, and some are moving forward with their own rules, George Michael Gerstein of Stradley Ronon tells ThinkAdvisor. New Jersey and Connecticut both have disclosure-based rules and New York has at least two relevant bills, the publication writes. Nevada has fiduciary requirements for broker-dealers and advisors but lacks regulation on compliance, which could be seen this year, according to ThinkAdvisor. Massachusetts had a bill that came to nothing, but it could resurface this year, and many states are holding back until the DOL and SEC rules are clear, the publication writes. This state legislation can complicate rulemaking further, Gerstein tells ThinkAdvisor.
A Drinker Biddle & Reath client alert stated that simultaneous fiduciary rules could force some issuers to comply with three potentially different rules, the publication writes. Even if the standards were the same, the enforcement of the rules could be very different, according to the alert cited by ThinkAdvisor.
