SEC Investment Advice Rule Coming

By Harry J. Lew

Now that the DOL Fiduciary rule is partially in effect (on June 9, 2017), retirement advisors might have expected a breather while the DOL re-considers full implementation in 2018. No such luck. That’s because the Securities and Exchange Commission (SEC) has just issued a call for public comment on a potential new investment-advice standard that will likely target conflicts of interest, among other regulatory concerns.

In a recent statement, SEC Chair Jay Clayton said, “I welcome the Department of Labor’s invitation to engage constructively as the Commission moves forward with its examination of the standards of conduct applicable to investment advisers and broker dealers . . . . I believe clarity and consistency—and in areas overseen by more than one regulatory body, coordination—are key elements of effective oversight and regulation.”

Although DOL Chair Alexander Acosta apparently invited SEC input on revisions to the DOL Fiduciary Rule, industry observers suspect the SEC may now actively pursue a broader investment-advice standard for the entire industry. This would not only transcend the retirement segment, but also address non-fiduciary issues such as the proper oversight of robo-advisors.

To this end, Clayton encouraged all parties to submit input on 17 different topics, including: 

• Consumer confusion over different types of financial advisors and firms operating under various standards of care.
• Whether consumer expectations of robo-advisors and other new market entrants are consistent with existing regulatory standards.
• Implication of the marketplace moving toward fee-based advisory models and away from commission-based brokerage compensation, especially on regulatory oversight.
• Industry reaction so far to the implementation of the DOL Fiduciary Rule.