SEC Unlikely to Move on Fiduciary and Fee Initiative

Realizing that the opposition has outgunned their lobbying efforts, advocates for an SEC fiduciary rule admit that they are losing the battle “badly” on trying to get the SEC to act on a proposed uniform rule. Similarly, they say they regard the possibility that the SEC will find ways to fund more examinations of RIAs as very low. 

At issue is the perceived confusion by the investing public between advisors that act as fiduciaries and brokers that act under the suitability standard. Under Dodd-Frank, the SEC has the authority, but not the requirement, to create a uniform fiduciary rule. Such a rule, critics say, would hurt the middle market.

Even if a uniform standard were adopted, the SEC cannot eliminate the use of commissions or require advisors to conduct on going monitoring, thereby creating two types of fiduciaries. Others wonder whether the rule would really hurt fiduciaries, who at least have a clear line of distinction today.

With just 9% of RIAs examined each year by the SEC and an estimated 40% of reps never reviewed, there’s a real concern about potential abuses. But additional funding to hire more examiners seems unlikely, and the idea of imposing additional user fees has hit a wall. Though experts expect the DOL, driven by determined advocates, to move forward with their initiatives after the November elections, that same will to act does not appear to exist at the SEC.