Flood of comments could influence SEC advice rule

Part of Invesco’s Legislative Insights Series

Flood of comments could influence SEC advice rule

Jon VoglerTime to read: 2 min

On June 21, the Fifth Circuit Court of Appeals issued a mandate officially implementing its March 15 ruling to vacate the Department of Labor (DOL) fiduciary rule in its entirety. With the demise of that rule, attention has shifted to the Securities and Exchange Commission (SEC) proposals released on April 18 on the standards of conduct for broker-dealers and investment advisors. According to former SEC member Michael Piwowar, public comments will be crucial in shaping the agency’s reform of investment advice standards.

The deadline for comments, which have been pouring in, is Aug.7. Some investor advocacy groups have asked the SEC to delay the deadline until after the publication of investor testing results related to disclosures in the proposal. SEC Chairman Jay Clayton told the House Financial Services Committee that the 90-day comment period is long enough, although when asked recently if the deadline would be extended, he said he’ll “see in August.”

Mr. Piwowar, a Republican commissioner who left his SEC role on July 7, said the agency will take a long time to review the comments. “Staff is going to be very deliberative going through the comments,” he noted. “The staff and the commissioners are going to take a lot of meetings this fall on it. From there, a lot depends on the comments we get.”

Several organizations have apparently mounted a campaign to encourage investment advisors to write comment letters to the SEC pointing out the differences between advisors, who must act as fiduciaries, and brokers, who are held to a suitability standard. Under the SEC proposal, brokers would be governed by a new best-interest standard.

The timeline for a final advice rule is difficult to predict, since personnel issues on the five-member commission have to be resolved first. The Senate Banking Committee has set a July 24 hearing for Elad Roisman, a committee aide who has been nominated to fill Mr. Piwowar’s seat. In addition, Democratic Commissioner Kara Stein must depart by December. Between the personnel changes, the complexity of the advice proposal and the evaluation of the public comments, it is unclear when the agency can settle on a final rule. Mr. Piwowar stated that he didn’t see the commission voting on the rule until next year.

In a related development, the SEC announced on June 29 that Chairman Clayton will be holding a series of roundtable discussions with “Main Street” investors around the country in July so they can “share their views on key questions about their relationship with their investment professional.” Roundtables have already been held in Houston, Atlanta and Miami, with additional meetings scheduled later in the month for Washington, D.C., Philadelphia and Denver.

Before each roundtable, participants will be given a draft document (titled “Which Type of Account is Right for You – Brokerage, Investment Advisory or Both?”) that summarizes a “hypothetical relationship” between an investor and a dually registered investment advisor, outlining the broker-dealer services on one side and investment advisor services on the other.

The relationship summary compares the types of services, obligations of the provider, fees and costs, and conflicts of interest for each. Participants will also get a form asking multiple questions for their feedback on the relationship summary.

We’ll continue to keep you posted on further developments surrounding the SEC advice rule.

InvestmentNews, “Piwowar: Comments will be critical in shaping SEC advice rule,” Mark Schoeff Jr., June 29, 2018
ThinkAdvisor, “SEC hits the road to hear investors’ thoughts on best-interest plan,” Bernice Napach, June 29, 2018


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Jon Vogler
Senior Analyst
Retirement Research, Invesco Consulting

Senior Analyst Jon Vogler draws on extensive pension expertise to offer retirement thought leadership for Invesco. In addition to writing Invesco’s Retirement blog, he tracks legislative and regulatory developments and contributes as a writer and editor to a variety of retirement-related Invesco communications.
Prior to joining Invesco in 2008, Mr. Vogler spent more than 25 years in the research, writing, compliance and underwriting areas of the retirement services industry, including roles as a senior consultant at Mutual Benefit Life’s pension consulting firm and as a compliance manager in the Automatic Data Processing retirement services division.
Mr. Vogler earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He earned a BA degree in history from Rutgers, The State University of New Jersey.

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