The Securities and Exchange Commission (SEC) should be the primary regulator to oversee the major changes being made to fiduciary regulation to improve standards and transparency and not the Department of Labor (DOL), say senior market players.
A July 13 hearing held by the Subcommittee on Capital Markets, Securities and Investments examined a legislative proposal by Congresswoman Anne Wagner to repeal the fiduciary rule and replace it with a best-interest standard.
The hearing featured five witnesses from financial institutions, including Mark Halloran, senior director, head of industry and regulatory strategy at Transamerica.
He said: ‘The SEC and state insurance regulators, not state courts and the plaintiffs’ bar, are best positioned to apply and enforce a best interest-standard of care.’
The draft pushes for increased disclosure from broker-dealers and gives the SEC rulemaking authority over the content of the disclosures.
‘We firmly believe that Congresswoman Wagner’s approach could provide a number of significant regulatory efficiency and investor protection benefits,’ said Jerry Lombard, president of the private client group at Janney Montgomery Scott, another fellow witness.
Lombard outlined that the current rule is confusing for his clients and that the SEC is a more appropriate organization to oversee the best interest-standard.
‘Our customers and advisors are very confused by the phalanx of new DOL rules applying to retirement plans,’ said Lombard.
‘A best interest-standard done right by the SEC, the expert agency responsible for broker dealer standards of conduct, would provide protection for retail customers without a bifurcated compliance regime imposed on the same market participants by different regulators.’
Cristina Martin Firvida, director of the financial security and consumer affairs at AARP, was one the only witness to disagree, saying she believes there is a place for both the SEC and the DOL to regulate the best interest-standard.
Separately, Jay Clayton, chairman of the Securities and Exchange Commission (SEC), stated that the DOL’s fiduciary rule is a major priority of the SEC in his first major speech since taking office on May 4.
At the Economic Club of New York on July 12, Clayton said coordination with the DOL is essential in bringing clarity to the fiduciary rule.
‘It is my hope that we can act in concert with our colleagues at the Department of Labor in a way that best serves the long-term interests of Mr. and Ms. 401(k),’ said Clayton. ‘There is a lot of work to do, and this issue is complex.’
He originally announced plans to work with the DOL on the rule in late June when he made an appearance before the Senate, mentioning plans to deal with it in an effective way that does not disrupt access of investment advice for Main Street investors.
Department of Labor Secretary, Alexander Acosta, used similar rhetoric stating, ‘It's my hope as the SEC also receives a full complement of commissioners that the SEC will continue to work with the Department of Labor on this issue.’
In late May, the SEC issued a statement seeking comments on standards for investment advisers and broker-dealers.