WASHINGTON -- The SEC's work on creating a uniform standard of care for brokers and investment advisors serving retail investors remains the subject of considerable discord within the commission, according to a top official.
Steve Luparello, director of the SEC's Division of Trading and Markets, said that the contentious issue of harmonizing fiduciary responsibilities remains high on the agency's to-do list, though a timeframe for when a proposal might materialize is far from certain.
"Being on the agenda for 2014 and getting it done in 2014 are completely different things," Luparello said in a panel discussion at FINRA's annual conference on Monday. "It is a priority and is certainly a live topic of conversation," he quickly added.
LEVEL THE PLAYING FIELD
Consumer advocates and some groups representing advisors have been urging the SEC to adopt rules that would apply a fiduciary duty to brokers-dealers, a "best-interest" standard generally perceived to be stricter than the current requirement that brokers make recommendations deemed to be suitable for retail investors.
SEC Chairman Mary Jo White has spoken on several occasions about the importance of leveling the regulatory playing field for advisors and brokers, two segments of the financial services industry that have been converging in the retail space while many investors are unaware of the disparate regulatory requirements.
White, however, seemed to hedge in her commitment to a uniform standard in recent testimony before a House committee, telling lawmakers that she is working with commission staff to evaluate a "range of options" for retooling broker regulation.
And it's not just the chairman who is uncertain on how to proceed, according to Luparello.
"You can also parse the comments of the other four commissioners and appreciate that there may not be a real coalescence of thought around any of this," he said. "There's just a lot of churn both inside and outside the building before we start to coalesce."
DoL FIDUCIARY RULE
The SEC's work on an expansion of the fiduciary standard is somewhat complicated by a proceeding underway at the Department of Labor, which is developing its own set of rules to extend fiduciary responsibilities to advisors to retirement plans. Opposition to that proposal has been fierce, with critics warning that the fear of legal liability could compel some advisors to abandon the retirement market, suggesting that small businesses and middle-income Americans would be hit especially hard.
Opponents have also raised concerns that if the two rulemaking proposals move forward on separate tracks, the result could be overlapping regulations that saddle advisors with an undue compliance burden.
Luparello acknowledged the concern, but said that the SEC has been working in concert with Labor as it mulls a fiduciary overhaul.
"All I can say is I think everyone agrees it's extraordinarily important to include the Department of Labor in those conversations," he said.
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