SEC Chair Asks for Input on IA and BD Conduct Standards
Commentary by Steven Lofchie
SEC Chair Jay Clayton solicited comments on "standards of conduct for investment advisers and broker-dealers." Chair Clayton argued that the implementation of the Department of Labor ("DOL") fiduciary rule (beginning on June 9, 2017) might have significant effects on SEC-regulated entities. In addition, he argued that financial sector developments over the past several years necessitate a new evaluation of conduct standards for advisers and broker-dealers:
"Given the significance of these issues — in particular, for retail investors looking to save for the things that matter most to them, including homeownership, education, and retirement — I look forward to robust, substantive input that will advance and inform the SEC's assessment of possible future actions."
The Chair solicited comments on:
- possible changes to investment adviser and broker-dealer disclosure requirements;
- how technological advances have impacted the manner in which investment advice is provided;
- the impact of early Fiduciary Rule compliance efforts on market participants and investors;
- standards for classifying a "retail investor"; and
- different potential SEC approaches to developing conduct standards.
Commentary
Whatever one thinks of the appropriate standards of conduct that should apply to broker-dealers and investment advisers doing business with retail investors, it is simply an absurd notion that the Department of Labor should set one standard for conduct as to certain assets and the SEC should simultaneously set general standards of conduct. Congress should direct that standard-setting as to retail securities transactions is within the exclusive purview of the SEC.