In negotiation over Wall Street reform, Senator Tim Johnson (D., S.D.) accepted a final counter-offer from the House Thursday afternoon that would give the SEC rulemaking authority to extend the fiduciary duty to brokers who provide investment advice. The SEC will be required to conduct a 6-month study, first, however, and issue a report on its findings.

The final deal reached is at least a partial victory for proponents of a universal fiduciary standard, but with a couple of caveats. "I like the rulemaking language but it’s just disappointing, because the downside is there’s no time table [for rulemaking] and no, 'you must do this rulemaking'," said Kristina Fausti, director of legal and regulatory affairs for fi360. "There is still a lot to be done from an advocacy standpoint so that the SEC stands behind what it has been saying, that, yeah, there has to be a fiduciary standard for broker/dealers."

SEC Chairman Mary Schapiro has come out in favor of a fiduciary standard for brokers, as have other commissioners and regulators, so there is reason to believe that the regulator will be proactive about rulemaking, but it will surely face pressure from the broker/dealer and insurance industries to be lenient when the findings of its report come out.

Unlike the Senate counter-proposal, the final House language would apply to brokers the same fiduciary standard that is in the Investment Advisers Act of 1940. "If they do engage in rulemaking all the house language is back in there," says Fausti. "If you promulgate rules, it has to be what’s in the Investment Adviser’s Act." On the other hand, she said that all of the carveouts for broker/dealers that have been in there from the start are still in legislative language.

Unlike the Senate counter-proposal, the time allotted to the study was also cut to 6 months from a year. "I am a little surprised that they moved up the deadline for the study. That’s very interesting," said Fausti. "That means the SEC is going to rely on whatever information it already has to get that done. It might not have the money to outsource that study."