As the chairwoman of the SEC appealed for a budget increase to beef up advisor exams, she hinted the commission is advancing a uniform fiduciary standard for broker-dealers and RIAs.
At a House appropriation hearing on Tuesday, Mary Jo White said increasing advisor exams is indeed a top priority within the commission, and reiterated her belief that the commission should implement a single standard of fiduciary duty for brokers and advisors who serve retail clients.
As in the past, White would not be pinned down on the timing of when a fiduciary proposal might emerge, but indicated that the process is moving forward at the commission.
"I can't give you a timeframe, other than to say, again, what I've said before, that it's complicated and not fast by any means," she told lawmakers. "And where it stands right now is, essentially, that the staff's parameters of recommendation are being discussed with my fellow commissioners."
A spokeswoman for the SEC declined a request for comment clarifying White's remarks on the status of the proposal.
Many observers have noted that it will be a tall order for the SEC to finalize any rule that would reshape the investment advisory sector like a uniform fiduciary standard in the waning months of the Obama administration, after which White and a slew of other political appointees are expected to exit the government.
White herself acknowledged that building consensus on a uniform fiduciary rule has been slow going. "This is a commission decision," White said. "That's not a quick and easy process, and it's not up to me alone."
Further complicating matters are the two vacancies on the five-person commission. President Obama's two nominees had their confirmation hearing earlier in March, and are now awaiting Senate confirmation.
Barbara Roper, director of investor protection at the Consumer Federation of America, suggests that SEC staffers might be doing the spadework of a rulemaking process, working on issues like defining operative terms such as “personalized investment advice,” but not moving too quickly as they wait for the new appointees to join the commission.
"My best guess, but it is just a guess, is that they are trying to get that general framework in place before they proceed to flesh out a rule proposal," Roper writes in an email.
Lawmakers asked White about the uniform standard of care in the context of the Labor Department's proposal, which would impose a fiduciary duty on brokers and advisors working with retirement investors and plans.
Congress members on both sides of the aisle have criticized that proposal, which is expected to be published as soon as early April, for a variety of reasons, one being the prospect that conflicting rules for advisors could result if the SEC and DoL both enact their own fiduciary regulations.
White acknowledged that challenge, but argued that each agency would be acting in its own area of jurisdiction — the SEC under Dodd-Frank and the DoL under the 1974 Employee Retirement Income Security Act.
Still, she said that it is incumbent on agencies across government to come together to try to harmonize rules in industries that are overseen by multiple regulators.
"You try to make them at least compatible, if you can," White said. "The coordination, obviously, with fellow regulators where we have overlapping jurisdiction is enormously important."
MORE EXAMINERS SOUGHT
White's primary appeal for a fiscal 2017 budget of $1.78 billion, an 11% increase over this year, is to increase oversight of advisors in the field.
"Last year and this year, one of our very high priorities is to try to increase the number of examiners we have to examine that investment advisor space," she told lawmakers, indicating that if Congress does not approve the full budget request, a significant portion of any increase the SEC does receive would go to advisor exams.
As the number of registered investment advisors continues to swell — now to nearly 12,000 — the SEC has been trying to beef up its examination program through measures, including harnessing technical capabilities like data analytics to send examiners to the firms most likely to pose risks to investors. Likewise, it has been shifting resources to focus on the larger firms that manage the most money.
All told, the SEC is looking to use its requested funding increase to hire an additional 250 staffers. Of those, 127 would be examiners. Most of the 127 examiners would be dispatched to the investment advisor program. (The SEC has already begun moving some examiners from the broker-dealer side of the house to the RIA wing.)
Even still, the commission has only been keeping pace the growth of the industry, and reports that it is only able to examine around 10% of advisors each year.
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