The Senate voted 60 to 39 Thursday afternoon to pass the Wall Street regulatory reform bill. The bill, which has been the subject of intense debate for months, now goes to President Obama for his signature. Republicans Sens. Scott Brown of Massachusetts, Olympia Snowe and Susan Collins, both of Maine, joined Democrats in voting for the bill. Only one Democrat, Sen. Russ Feingold (D., Wisc.), voted against it.

Among other things, the legislation is intended to protect against future financial crises like the one suffered in the fall of 2008 and early 2009, but much of the reform effort will be left to regulators like the SEC, which has several dozen studies to complete.

Two of those studies will have a big impact on financial advisors: a 6 month study of the fiduciary standard and gaps in existing regulation for financial advisors, and a second 6 month study of whether an SRO for RIAs would be effective.

If the results of the first study indicate that it is needed, the SEC has rulemaking authority to extend the fiduciary standard as defined under the Investment Adviser’s Act of 1940 to all financial advisors. It does not have the authority to delegate any of its authority over investment advisers to an SRO, however, regardless of the results of the second study. This would require further legislation.

Will the SEC opt for a 1940 Act fiduciary standard for all? At least one industry insider thinks the regulator will get pretty close:

“I think the SEC will go pretty far down that road, but it is hard to tell just how far,” says Blaine Aikin, president and CEO of fi360, a firm that helps broker/dealers and others revamp their businesses so that they can adopt the fiduciary standard. “That term harmonization of the regulations is somewhat concerning for those who are advocates of the fiduciary standard, because it sounds so much like homogenization,” he says. “But from what I’m observing I think it means more along the lines of making certain accommodations that are necessary from a business perspective, that don’t fundamentally change the authentic fiduciary standard.”

For example, he says, the SEC is unlikely to rule out proprietary products, but they will probably require firms and advisors to document the application of sound due diligence to such products, and be able to demonstrate that such products are competitive. Similarly, the regulator is unlikely to rule out commissions, but firms would need to find a way to neutralize compensation to the advisor. “So that’s a management of conflicts as opposed to an absolute avoidance of conflicts and that’s appropriate,” he says. “I wouldn’t view that level of harmonization as destructive to the authentic fiduciary standard.”

For more on Wall Street reform, see previous stories:
The Final Wall Street Reform Bill And You

Congress Says SEC Can Create Fiduciary Standard For Brokers

Fiduciary Duty For All Hangs On Senator Tim Johnson