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House Votes to Curb SEC Powers

January 13, 2017

The U.S. House of Representatives has passed a regulatory relief bill aimed at curbing the power of the SEC, ThinkAdvisor writes.

Sponsored by Ann Wagner, R-Mo., the SEC Regulatory Accountability Act requires the SEC to perform more stringent cost-benefit analysis on any of its proposed rules, including an assessment of available alternatives, the publication writes.

The bill also stipulates that the regulator can’t issue rules when it can’t prove the benefits of a new regulation “justify” the costs of the rule, according to a statement from Wagner cited by ThinkAdvisor.

Furthermore, the regulator is tasked with reviewing all of its regulations every five years and streamline or repeal rules that become outdated, ineffective or overly burdensome, the publication writes. In a statement, Wagner said the bill “will help drain the swamp” built by Washington bureaucrats during the presidency of Barack Obama, ThinkAdvisor writes.

Last week it was reported that Wall Street lawyer Jay Clayton, currently a partner at Sullivan & Cromwell, will lead the SEC under a Donald Trump administration.

The SEC, meanwhile, has unveiled its examination priorities for 2017, which include a heightened focus on digital advice, wrap fees, exchange-traded funds and firms that hire brokers with misconduct records.

In the robo-advice space, the regulator plans to examine providers’ compliance programs, including oversight of algorithms generating recommendations, as well as data protection measures and conflict of interest disclosures, the SEC says.

Firms charging a bundle fee for advice and brokerage services can expect more scrutiny of their disclosures of conflicts of interest and trading practices.


The SEC will also examine how broker-dealers recommend ETFs with niche strategies and particular share classes of mutual funds.

In addition, the regulator wants to beef up examinations of never-before examined registered advisors, but it also plans to expand its scrutiny of firms that hire brokers with disciplinary records, as well as the brokers themselves.

Last week, Finra released its exam priorities, which also include increased scrutiny of companies hiring brokers with disciplinary records.

The SEC also plans to give more attention to issues affecting senior investors — particularly how broker-dealers sell variable insurance products and target date funds to elderly investors and what they do to spot potential financial exploitation of seniors.

In addition, the regulator plans to increase its oversight of Finra while continuing its examination of cybersecurity and anti-money laundering measures, according to the SEC.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.