Rulebook

Fiduciary Standard May Not Be in the Cards

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The Securities and Exchange Commission released its long awaited request for data and other information on Friday, which has the industry buzzing about the potential rule moving forward. But many forget that the agency doesn’t have to come out with a rulemaking at all, a fact the SEC pointed out in the 72-page request:

The Commission recognizes that Section 913 of the Dodd-Frank Act does not mandate that we undertake any such rulemaking, and the Commission has not yet determined whether to commence a rulemaking.

This begs the question: Is there a possibility that the SEC won’t even come out with a rulemaking, after all that? That will depend, of course, on what feedback the SEC gets from investors and the industry at large. The agency also said it would be sensitive to the costs and benefits and “take into account existing regulatory obligations that apply today to broker-dealers and investment advisers.”

There are 106 new federal regulations across industries, resulting in $46 billion in new costs, said Jim Crowley, managing director and chief relationship officer with Pershing, at the recent Financial Services Institute annual conference.

In an interview with WealthManagement.com this afternoon, Crowley said the regulatory arbitrage needs to stop. The industry has a public trust and confidence issue that needs to be improved. It doesn’t necessarily need to be regulated or in a rulemaking, but it should be part of a firm’s ethics, he said.

“The harmonization of the standards of care and regulatory obligations between broker/dealers and investment advisors would be huge undertaking and dramatically change the financial services landscape as we know it,” said Patrick J. Burns, a Beverly Hills, Calif. attorney who handles compliance issues for financial advisors.

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