By Arthur D. Postal
WASHINGTON – Securities and Exchange Commission chairman Mary Jo White today denied that the Obama administration pressured her agency into pursuing the establishment of a uniform fiduciary standard.
Speaking at a House Financial Services Committee (FSC) hearing on the SEC budget, White said that the decision to pursue a uniform fiduciary standard aimed at those selling investment products into retirement plans was her own.
“Even before I was confirmed as SEC chairman I voiced concern” about the issue, White said in response to a question from Rep. Blaine Luetkemeyer, R-Mo., who heads the Housing and Insurance Subcommittee of the House FSC. She repeated her position under derisive questioning from Rep. Ann Wagner, R-Mo., who appeared unwilling to accept White’s statement that she acted unilaterally.
White also cited the Dodd-Frank Act provision giving the SEC authority to pursue establishing the fiduciary standard, as well as staff work performed on the issue prior to her becoming chairman.
White also came under intense questioning from Democrats on the FSC who derided her decision to announce her plans to pursue a new uniform fiduciary standard while appearing at an event sponsored by the Securities Industry and Financial Markets Association (SIFMA). Democrats noted that SIFMA and its members oppose the Department of Labor (DOL) decision to go its own way on crafting a new fiduciary standard aimed at those selling investment products into retirement plans.
The Democrats’ comments were linked to an interview Sen. Elizabeth Warren, D-Mass., a strong supporter of the DOL’s initiative, gave to Reuters late last week.
"I was surprised that (Chair) White announced the rule at a conference hosted by an industry trade group that spent several years and millions of dollars lobbying members of Congress to block real action to fix the problem," Warren told Reuters.
Also at the hearing, Republican members of the committee voiced support for the view that the SEC has the sole authority to oversee advisors and agents who sell investment products into retirement plans. White responded to that by saying that the DOL has “separate mandates,” and that the two agencies “will proceed separately” in crafting new standards dealing with the standard of care required of agents and advisors in selling investment products.
At the same time, White said, “the (SEC) staff and I are committed to continuing these conversations with the DOL, both to provide technical assistance and information with respect to the SEC’s regulatory approach and to discuss the practical effect on retail investors, and investor choice, of their potential amendments to the definition of ‘fiduciary’ for purposes of the Employment Retirement Income Security Act of 1974 (ERISA).”
Rep. French Hill, R-Ark., and Rep. Bob Dold, R-Ill., also mentioned at the hearings that both agencies should “put policies in place that will encourage investors to save.”
In her prepared remarks on the fiduciary standard at today’s hearing and in response to questions from committee members, White said that crafting a new fiduciary standard presents significant challenges to the SEC.
The first is how to define the standard, she said, noting that her initial view is that the standard “should be codified, principles-based, and rooted in the fiduciary duty applicable to investment advisors.”
A second challenge, which was expressly contemplated by Section 913 of the Dodd-Frank Act, she said, “is to provide clear guidance on what the standard would require, and how current business practices can or cannot continue under the standard – importantly, for both broker/dealers and investment advisors.”
<p> White said that a third challenge is providing for the meaningful application, examination and consistent enforcement of a uniform fiduciary standard. “Without effective examination and enforcement, a uniform fiduciary standard could be mere words on a page,” she said.
She also repeated her view that, in addition to pursuing a uniform fiduciary standard, the SEC is looking to intensify its oversight of registered investment advisors (RIAs).
“Central to this challenge is extending our examination coverage for registered investment advisors,” she said.
She said that she has instructed the SEC staff, in addition to developing rules for the SEC commissioners to vote on, to recommend a program of third-party compliance reviews for investment advisors “to supplement, but not replace, examinations conducted by the Office of Compliance Inspections and Examinations (OCIE).”
InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].
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