Regulators and lawmakers are unlikely to enact any big-ticket items that will affect financial advisors by the end of this year. While the regulatory machine isn’t dead, Washington gridlock ensures that both Congress and regulators will tread carefully—good news for advisors worried about change, at least for now.

“Agencies take a go-slow approach,” says Duane Thompson, senior policy analyst for fi360 and founder of Potomac Strategies. “Things seem to be moving at a glacial pace, so no one’s going to be caught by surprise.”

While the rules may not be enacted before the end of the year, the details of some proposals are likely to come into clearer focus. FINRA may release a final proposal requiring disclosure of recruitment bonuses, while the Department of Labor may issue new details on its proposed fiduciary standard for ERISA accounts. Meanwhile, tax reform and money market reform have also seen some movement in Washington D.C.

Fiduciary Standard Stuck…For Now

The biggest regulatory concern—a uniform fiduciary standard—will be put off until next year at the earliest, Thompson says. “Fiduciary debate will take a lot longer to sort out,” he says. The SEC just put out an information request in March. “It’s going to take time to absorb and review that data,” he says.

Investment Adviser Association’s executive director David Tittsworth agrees. “The fiduciary standard is still a long-term project, he says. “I think that in terms of rulemaking, there will be a significant period of time before they move forward on it.”

The SEC's efforts to put into effect some of the rules required by the JOBS Act and  Dodd-Frank could be further delayed by the departure of two commissioners this year, Thompson says. Although President Obama tapped economist Michael Piwowar to replace Republican commissioner Troy Paredes and market structure expert Kara Stein to replace Democrat commissioner Elisse Walter last week, the two will still need to gain Senate approval before starting the transition.

For instance, the SEC has yet to enact the much-anticipated JOBS act rule lifting the ban on general solicitation for private investments. Agencies need to tread carefully because, if poorly planned, the rules could easily fail in their intent and lead to claims of fraud and abuse, says Thompson. 

Legislation Lags From Lack of Cooperation

Sick of SEC inaction, Republican lawmakers recently implemented measures to force the regulator to apply cost-benefit analysis to any new regulation or rule.

The SEC Regulatory Accountability Act, sponsored by Rep. Scott Garrett (R-N.J.), would also force the agency to verify that new and existing regulations were written in easy-to-understand format. The bill earned a green light from House members on May 17, but policy-tracking website GovTrack.com gave it only a 15% chance of being enacted.

SEC commissioner Elisse Walter told attendees at FINRA’s annual conference that the agency already conducted economic analysis.  “This bill could truly keep us from moving forward effectively,” she said.

Maxine Waters (D-Calif.) also introduced the “Investment Adviser Examination Improvement Act of 2013,” an updated version of her 2012 bill. The proposed legislation calls for more advisory firm examinations by allowing the SEC to charge investment advisors an annual fee.

But because Waters is the ranking member of the minority party and the bill is a re-introduction of previous legislation that went no where, GovTrack only gives H.R. 1627 a 1% chance of getting past committee.

The exam fees bill was “dead on arrival,” Thompson says, but advisors should keep an eye on the idea, since it’s the second time it was proposed and it goes toward the larger issue of increased SEC examinations.

“There could be movement in the house on legislation, possible that there could be some in the Senate, but you need both to pass bills,” Tittsworth says.

So What is Coming Out This Year?

In addition to FINRA's move to force brokers to disclose compensation bonuses to clients, advisors should also be watching the Dept. of Labor's move to define a fiduciary standard for ERISA accounts, which is now expected to be released a few months after an initial July projection. Phyllis Borzi, assistant secretary for the department's Employee Benefits Security Administration strongly suggested during the Investment Management Consultants Association’s May conference that the new proposed rule will include some exemptions to accommodate different business practices.

Advisors are likely to see some movement on money market reform. The new chair, Mary Jo White has indicated in several comments before Congress that money markets are a top priority, and on Wednesday, the five commissioners voted unanimously for tougher rules governing the funds. That opens the window to a ninety-day period for comments before a final decision is made. “Regulators and the SEC are under pressure to do something to assure consumers there’s not a run on money markets,” Thompson says.

Advisors should also be watching the new registration requirements (Form PF) for investment advisers with at least $150 million in private fund assets. “About 40 percent of all SEC-regulated firms have some affiliation with some type of private fund,” Tittsworth says. At least 10-15 percent of IAA’s membership has to deal with the CFTC, indicating the issue affects a number of firms.

This is especially key as the SEC looks to boost examinations. White asked Congress earlier this month for funding that would allow for 250 more examiners. “The SEC may have more resources to carry out more exams on advisors,” Tittsworth says, making compliance with Form PF a major concern.

Tax reform is also something that lawmakers and regulators are looking at seriously, improving the odds that legislation may appear in the not-too-distant future.

Specifically, the Joint Committee on Taxation released a 568-page report on various tax reform options in early May. The report is largely based on House Ways and Means Committee’s initiatives involving financial derivatives, small businesses and the international business taxation.  “If it gets any momentum, that’s something that advisors will need to watch,” Thompson says.

And that’s good advice for advisors on all regulatory fronts. While regulators and lawmakers have indicated that some initiatives are priorities and others are long-term goals, that can always change.  Advisors should keep a weather eye on the horizon and still keep their hands on the wheel.