SEC chief promises ‘big effort’ on uniform fiduciary standard
February 23, 2018 by Kenneth Corbin
WASHINGTON — Asked about his most pressing priorities, SEC Chairman Jay Clayton didn’t hesitate: he wants to level the playing field for investment advisors and broker-dealers.
Clayton fielded questions from former SEC Chairman Harvey Pitt at the annual SEC Speaks conference in Washington, where he made it clear that he wants to put forward a proposal for a new rule that would hold advisors and brokers to the same standard of care when working with retail investors.
“We’re going to make a big effort to try and bring clarity and harmony to investment advisor [and] broker-dealer standards of conduct,” Clayton said.
“I think it’s something that the market needs. I think it’s something that regulators need,” he said.
Work on the rulemaking could accelerate now that the SEC has a full complement of commissioners, following the December Senate confirmation of Hester Peirce and Robert Jackson.
Nearly a year into his tenure as chairman, Clayton has spoken often of his interest in furthering protections for Main Street investors, whom he has colloquially dubbed Mr. and Mrs. 401(k).
He sees a uniform standard of conduct for brokers and advisors as a centerpiece of that approach to regulation, observing that most investors aren’t aware of the arcane distinctions of the broker’s suitability standard and the RIA’s fiduciary duty.
“There’s no doubt there’s a great deal of confusion in the marketplace as to what standard of conduct applies to a particular relationship,” he said.
Apart from the general confusion of different industry designations, Clayton also suggests that investors could be materially harmed by lax safeguards on financial advice.
“If there are areas where protection appears to be lacking, [that] should be enhanced,” he said.
Clayton also takes issue with the tangled regulatory environment in which many financial professionals operate, stressing the need to simplify the rules of the road. He observes that one dually-registered advisor could be subject to oversight from state securities and insurance regulators, FINRA, the SEC and the Department of Labor.
“If that advisor happens to be affiliated with a bank, he may have one or two bank regulators on top of that,” Clayton said. “I’m all for regulatory coordination, but having that many people with different standards and different lenses around that same relationship — I think we can bring some regulatory harmony to that place.”
