Legal

Fiduciary Duty Rule Pushed Back By SEC

By Staff Report

Mar. 30, 2011

The Securities and Exchange Commission staff member who coordinated the agency’s study of a universal fiduciary duty for retail investment advice said March 28 that a follow-up regulation won’t come until later in the year.


The fiduciary study, mandated by the Dodd-Frank financial regulatory reform law, was delivered to Congress in January. The staff report called for SEC commissioners to extend the fiduciary duty requirement to broker dealers to protect investors, who it says are confused by differing standards that investment advisers and brokers must meet.


The study, however, has run into resistance from the two Republican SEC commissioners, Kathleen Casey and Troy Paredes, who dissented when it was transmitted to Capitol Hill. They argued that the study’s conclusion was not backed up by rigorous economic analysis.


Congressional Republicans recently sent a letter to SEC Chairman Mary Schapiro urging her not to proceed with the rulemaking, citing the same concerns expressed by Casey and Paredes.


A Dodd-Frank timeline on the SEC website says that the agency will promulgate a fiduciary-duty regulation sometime between April and June. The Dodd-Frank law authorizes the SEC to proceed with the rulemaking.


But Jennifer McHugh, senior adviser to Schapiro and coordinator of the fiduciary study, told an audience at an Investment Company Institute conference in California that SEC action will “likely occur later in the year.”


She said that the agency has not formed a “rulemaking team” and is “meeting with outsiders to get their reaction rather than moving straight to rulemaking.”


“We’ve been focused on practical, real-world implications” of imposing a universal standard of care, she said.  


Filed by Mark Schoeff Jr. of InvestmentNews, a sister publication of Workforce Management. To comment, email editors@workforce.com


 


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