IAA Alert: June 2, 2017 - SEC Seeking Comments on Fiduciary Duty


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SEC Seeking Comments on Fiduciary Duty

June 2, 2017: The SEC has re-kindled its consideration of the standards of conduct applicable to investment advisers and broker-dealers when they provide investment advice to retail investors, according to a statement issued yesterday by Chairman Jay Clayton.

Citing the Department of Labor's Fiduciary Rule that goes into effect on June 9 and the need for coordination with the DOL, Chairman Clayton announced that the SEC is soliciting public comments to reassess the “current regulatory framework, the current state of the market for retail investment advice, and market trends” and to “evaluate the range of potential regulatory actions.” According to the statement, prior suggestions for regulatory action have included requiring enhanced disclosures to mitigate investor confusion, development of a best interest standard for broker-dealers, and pursuing a single fiduciary standard combined with a harmonization of rules applicable to both investment advisers and broker-dealers.

The statement includes an extensive number of questions – most of which the SEC solicited and received comment on in 2013 – that cover the following areas:

  • Investor confusion;
  • Conflicts of interest;
  • Investment advice provided in new ways (e.g., robo-advisers, fintech);
  • Business trends;
  • Experiences of retail investors and market participants in connection with implementing the DOL’s Fiduciary Rule;
  • The benefits and costs of having multiple standards of conduct for accounts (e.g., DOL vs. SEC; IA vs. BD);
  • Whether the standards for investment advisers and broker-dealers should be the same or different, including potential regulatory actions (i.e., disclosure-based vs. standards-of-conduct-based approach), implementation issues (e.g., policies and procedures), and SEC oversight;
  • Whether the SEC should take an incremental approach;
  • The potential for private remedies to be available for violations of any new requirements;
  • Other costs and benefits;
  • Regulatory developments in foreign jurisdictions; and
  • Significant developments since the SEC’s 2013 solicitation of information relating to these issues.

In our May 10 letter to Chairman Clayton outlining the IAA’s regulatory priorities, we specifically urged the SEC to focus any future efforts in this area solely on the standard of care for broker-dealers and to refrain from any regulatory action that would diminish the robust fiduciary duty already applicable to investment advisers.

The SEC did not provide a deadline for comments, but did reference a potential future rulemaking. The IAA will continue to engage with the SEC on these issues and invites feedback from members. For questions or to provide feedback, please contact a member of the IAA legal team.

IAA members can visit the IAA Alert page in the Members Only section of our website or contact staff for more information.

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