Barron's (April 13, 2018) -- Reaction is mixed from investor advocates and industry groups to the SEC’s brief outline of investment advice standards it will propose.
On Wednesday, the agency posted a notice on its website saying it will hold a public meeting next week to propose three items: whether to propose new rules and forms for brokers and RIAs to summarize their relationships with clients; whether to establish a standard of conduct for brokers; and whether to provide an “interpretation” of the fiduciary responsibility of RIAs.
If the proposal is adopted, it could eventually supplant the DOL fiduciary rule, which suffered a potentially fatal court setback last month.
“The rule appears to have the three main components it needs to be a good rule,” Barbara Roper, director of investor protection at the Consumer Federation of America, tells InvestmentNews. “The $64,000 question — or the $17 billion question — is whether the standard of conduct they propose is sufficient to reform harmful broker-dealer business practices.”
The $17 billion she referred to was the amount of harm investors with retirement accounts had incurred because of brokers’ conflicts of interest, according to an Obama administration study.
Another investor advocate is less sanguine.
“So far, so bad,” Andrew Stoltmann, president of the Public Investors Arbitration Bar Association, tells InvestmentNews. “It looks like it’s going to be a disclosure-based rule. That’s grotesquely bastardized from what the DOL rule is. I’m concerned SIFMA and the securities industry has already infected this process.”
SIFMA represents broker-dealers. Managing director Kevin Carroll says the SEC’s notice doesn’t provide enough information to know whether the proposed rule will rely mostly on disclosure.
“We don’t think a best-interest standard would be satisfied by disclosure alone,” he is quoted saying. “It seems fairly consistent with what we were expecting based on conversations [with SEC staff] over a period of months … We’re cautiously optimistic.”
–Ross Snel