SEC Names New Chief Of Staff

WASHINGTON — A former staffer with experience in the fiduciary standard wars has been named chief of staff at the Securities and Exchange Commission (SEC).

The appointment of Andrew J. “Buddy” Donohue as staff chief was made as SEC chair Mary Jo White gears up to tackle the creation of a uniform fiduciary standard for the sale of financial products.

Donohue will replace Lona Nallengara, who will leave the SEC in June.

The SEC has been dealing with the fiduciary issue off and on for a decade. It reached its peak in the 2009-2011 period. That was when the SEC was tasked through the Dodd-Frank financial services reform law to examine the feasibility of a uniform fiduciary standard, and, after determining that, work on crafting a new standard.

The agency found in 2011, under former chairman Mary Schapiro, that it was appropriate for it to establish the uniform standard, but couldn’t come up with a proposed rule that had enough support to be passed by the full commission. Work slowed in 2011 as commission opposition continued, and Schapiro stepped down as chairman at the end of 2012.

White, the new chairman, recently announced that the agency will again take up the issue. This decision was fueled by the Department of Labor’s announcement of its own proposal in mid-April. The DOL’s authority extends only to products sold into retirement plans and regulated under the Employee Retirement Income Security Act (ERISA).

Opponents of the DOL’s proposal argue that its implementation will mean that, potentially, providers of investment products regulated under federal law could be subject to differing standards if the DOL adopts a new rule and the SEC fails to follow suit.

The DOL is proceeding because it has Obama administration support.

The SEC is an independent agency with five commissioners, three from the party of the president, and two from the opposite party. In this case, Republicans on the commission have questioned whether there is a need for a new standard.

Court rejections of some of its proposals, and the decision in the late 1990s by a Republican-controlled Congress to remove the SEC’s independent fund-raising authority, also have limited the agency’s ability to do its job.

For example, over the past few months, both the House and Senate refused to honor a request for additional money for the SEC so that it could intensify examination of investment advisors.

Donohue returns to the SEC after serving as director of the agency’s Division of Investment Management from May 2006 to November 2010. As director, he was instrumental in developing regulations governing the asset management industry. He also was responsible for policy and oversight affecting registered investment advisors as well as investment companies and the investment company industry.

Most recently, Donohue has been managing director, associate general counsel, and investment company general counsel at Goldman, Sachs & Co. in New York, where he was primarily responsible for legal matters related to its registered investment companies.

Prior to that, he was a partner in the Investment Management Practice Group at Morgan Lewis & Bockius in New York from March 2011 to October 2012.

From May 2003 to May 2006, Donohue served as global general counsel at Merrill Lynch Investment Managers in New Jersey. In that role, he oversaw the firm’s legal, regulatory and compliance matters for the investment advisory business.

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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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].