If anyone was hoping to catch a break on the regulatory front now that the market environment has eased, they’re in for a surprise. Speaking at this morning in New York at SIFMA’s annual meeting, Securities and Exchange Commission Chairman Mary Schapiro layed out a number of regulatory issue the SEC will be paying close attention to in the coming months. “We will intensify our focus on the structure of our equity markets, newly emerging products, and the regulatory gaps that still exist or are bound to show up as new rules take effect. And, lest there be any confusion, the path we will take in deciding which way to turn will always be the one pointed in the direction of investors,” Schapiro said Tuesday morning.
Retirement products will be examined closely, as manufacturers flood the market with new products featuring the latest gimmick or marketable fad. Ultimately, Schapiro said, investors need products they can understand with simple, clear disclosure. “Issues related to disclosure, product development and marketing for retirement products will be areas of focus in the coming year at the SEC,” she said. “Among those already on the radar screen are target date funds and securitized life settlements. In fact, I have established a task force to review the growth of the life settlements market, focusing on sales practices, disclosure, and the emerging prospect of securitization of life settlements.”
The SEC will also focus on the activities of high frequency traders, due to the growing volume of orders and trades, and the speed of order routing and trading. “I believe we need a deeper understanding of the strategies and activities of high frequency traders and the potential impact on our markets and investors of so many transactions occurring so quickly,” Schapiro said. “And we need to consider whether there are additional legislative authorities needed to address new types of market professionals whose activities may not be sufficiently regulated.”
Schapiro also reiterated her support for the application of a fiduciary standard of conduct for financial services professionals who provide investment advice. “That being said, we all must recognize that a standard of conduct, by itself, does not eliminate fraudsters,” she said, “which is why the fiduciary standard must be coupled with an effective and, I believe, harmonized, regulatory program for broker-dealers and investment advisers.”
