The Securities Industry and Financial Markets Association (SIFMA) is hoping that 2013 will see movement on the effort to implement a uniform fiduciary duty for investment advisors and broker-dealers when providing personalized advice to retail clients. Leaders of SIFMA are urging the SEC to look past opposition and press ahead with its development of a rule implementing a stricter ethical standard for brokers.
The SEC was authorized by Congress to impose a common standard, but it isn’t required to do so. The Dodd-Frank financial reform law gave the SEC the authority to promulgate a rule that would subject brokers to the same fiduciary standard for retail investment advice that investment advisers must now meet. Currently, brokers adhere to a less stringent suitability standard.
In a document released last week, SIFMA listed the fiduciary-duty rule as one of its top three priorities for 2013. “As we have been throughout this process, we’ll continue to engage with the SEC as they look to move forward with its rulemaking process on fiduciary,” said SIFMA spokesman Andrew DeSouza. “What we are expecting from the SEC in the coming months is a sort of concept release or request for information that’ll be the next step toward actual rule making. We expect that release to come out by the end of the first quarter,” DeSouza said.
The SEC has not scheduled a release date for the fiduciary-duty cost-benefit analysis. But SEC Commissioner Daniel Gallagher said that the cost-benefit analysis would be “easy to prioritize,” if SEC Chairman Elisse Walter chose to do so because of the amount of work SEC staff has put into developing a rule. Nevertheless, Mr. Gallagher cautioned that the commission should proceed carefully. “It’s not mandated [by Dodd-Frank],” Mr. Gallagher said during an appearance at the U.S. Chamber of Commerce. “We should be very deliberative. I’m not convinced we should do anything in this space under our [Dodd-Frank Section] 913 authority.”
Accordingly, while SIFMA wants to eliminate uncertainty, the SEC is currently split along party lines. The brokerage industry has backed the idea in principle, but has strongly opposed applying a set of rules that hinders their ability to conduct business as usual.
Erica Reed is an associate attorney at Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor, P.A. She is a member of the Business Torts Department of the firm. Her practice focuses primarily upon representing individuals and entities in the areas of securities litigation and arbitration, as well as complex business and antitrust litigation.