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Industry Takes Sides on SEC Fiduciary Rule

September 8, 2017

Just as various industry players were divided on the Department of Labor’s fiduciary rule, the wealth management industry is split on how the SEC should approach its own version of the best-interest standard.

The Investment Adviser Association wants the SEC to adopt a tougher standard on broker-dealers while leaving the existing standard applied to investment advisors, Compliance Week writes. Writing in response to SEC chairman Jay Clayton’s June request for comment on standards of advisor conduct, the IAA also argued against a “disclosure only” solution, according to the publication. Such an approach was one of the options the SEC had requested comment on.

The SEC had also asked for comment about the efficacy of multiple standards rather than one standard that would apply to all advisors. According to the IAA’s letter, a single uniform standard “would dilute the existing Advisers Act fiduciary standard and lead to inconsistent treatment of retail and institutional clients,” Compliance Week writes.

The SEC has received dozens of letters in response to its request for comment, with opinions split on how it should move forward on a possible new advice standard, InvestmentNews writes.

Some brokerage industry groups are urging the regulator to resort to disclosures while strengthening the suitability standard, which lets brokers recommend higher-cost products as long as they meet the client’s goals and risk profiles, according to the publication.

The Investment Company Institute is advocating for a best interest standard requiring advisors to disclose conflicts of interest and charge reasonable compensation, InvestmentNews writes.

But Fidelity Investments is urging the SEC to rely on disclosures and develop principles-based standards, according to the publication.

Meanwhile, Dalia Blass, the new head of the SEC’s investment management unit appointed last week, may be putting the fiduciary standard at the top of her to-do list, InvestmentNews writes.

Former investment division director Norm Champ, currently a partner at Kirkland & Ellis, tells the publication he would be “surprised if that’s not the first order of business.”

Blass’s views on the issue aren’t clear and she declined comment to InvestmentNews. But industry experts tell the publication she’s qualified to tackle the fiduciary question and has the ability to get consensus from the commissioners.

Blass had worked in the division for about 10 years before leaving in 2016 for the law firm Ropes & Gray, according to InvestmentNews.


The fate of the DOL’s fiduciary rule, in the meantime, remains unknown. The rule, which purports to require only retirement account advisors to put clients’ interests first, went into partial effect in June. The original date was already postponed by 60 days following a memorandum from President Donald Trump requesting further review.

The White House has since granted the DOL’s request to push back the rule’s final compliance deadline from January 2018 to July 2019. Experts say the delay will lead to a major revamp of the rule and the DOL has already said it will not enforce the rule’s provision barring advisors from requiring clients to sign arbitration waivers.

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