SEC, DOL Fiduciary Focus: A Potential Double Whammy?

By Andrew Remo • March 26, 2015 • 0 Comments

The Securities and Exchange Commission and Department of Labor are both working on fiduciary issues — but their different approaches appear to be on different schedules.

On March 24, it was SEC Chair Mary Jo White’s turn to take questions from Congress regarding the commission’s plan to impose a uniform fiduciary standard of conduct for broker-dealers and investment advisors when providing personalized investment advice about securities to retail customers. White appeared before the House Committee on Financial Services that day to discuss the SEC’s budget and regulatory agenda for the upcoming fiscal year.

In testimony submitted to the committee, White said that she supports a uniform fiduciary standard of conduct for broker-dealers and investment advisors. Responding to questions from committee members, White reiterated that she remains seriously concerned that the current rules treat identical conduct by financial service providers toward retail investors differently.

During the course of the hearing, committee members raised concerns about the lack of coordination between the SEC and the DOL as both agencies pursue separate tracks to change the standards of conduct for investment advice applicable to financial service providers within those agencies’ areas of jurisdiction. However, White made clear during the hearing that the DOL and SEC are separate agencies with responsibilities to enforce separate statutes, regardless of regulatory overlap and the conflicting rules for financial service providers that might result. She also highlighted the “technical assistance” that SEC staff has provided to DOL as they are poised to issue new changes to the definition of fiduciary under ERISA.

Thus, the financial services industry could be looking ahead to a double regulatory whammy as the DOL and the SEC both move forward with potentially wide-ranging new rules for financial service providers. This double whammy, moreover, is on two different time tracks. The DOL stands ready to issue its proposed rule once the Office of Management and Budget finishes its review process in late spring. The DOL’s goal is to finalize the rule before President Obama leaves office.

White, on the other hand, indicated at the March 24 hearing that the SEC is still at the beginning of its fiduciary rulemaking process, even though she has come to her own personal conclusion that a uniform fiduciary standard of conduct for financial service providers is needed. The SEC process seems certain to take much longer than the DOL’s aggressive timetable.

So it looks to be a tumultuous time for company compliance officers as the financial services industry is impacted by not one, but two, new fiduciary standards in the future.

Andrew Remo is the Congressional Affairs Manager of the American Retirement Association.