Published on Sep 7th, 2017 |

On July 25, 2017, SEC Commissioner Michael Piwowar offered a response to the Department of Labor’s public request for input about the fiduciary rule and exemptions for prohibited transactions. In his letter, Piwowar directly asked the DOL to “reconsider this misguided rulemaking,” citing three key concerns:

  • Piwowar claimed that the Fiduciary Rule “is dismissive of” the effectiveness of the disclosure of conflict of interest, despite the fact that over many decades the SEC has afformed this disclosure is in fact effective. He called on the DOL to work closely with the SEC and its professional staff, relying on their enforcement experience rather than dismissing disclosures of conflict of interest entirely.
  • Piwowar noted that the Fiduciary Rule does not clearly and adequately differentiate between “advice” and “selling” activitiesof investment advisers and broker-dealers, which is in contrast to the SEC’s own methods of regulation. According to Piwowar, current regulations offer enough insight of the activities.
  •  Piwowar asserted that far beyond retirement accounts, the Fiduciary Rule could impact financial services as an industry and could harm the relationships between brokers and clients.

Piwowar assertions have been supported by the Wall Street Journal, which reported that the Fiduciary Rule may already be contributing to the fact that more assets are being directed to self-directed accounts and more fee-based assets are seen at bigger brokerages, with both of these activities becoming more common since the release of the Fiduciary Rule in 2016.

Requests to push back the compliance date continue to be directed at the DOL and legislators continue effectors to repeal the rule. In the meantime, the Wall Street Journal reports that the rule favors self-directed accounts and fee-based accounts because these forms of accounts do not rely on commissions and allow investors with low trading volumes to reduce costs.

There is no doubt that the debate about the Fiduciary Rule will continue and that firms need to be prepared for compliance issues and challenges. If you need personalized and comprehensive regulatory advisory solutions, contact Vigilant Compliance. We are a full service global compliance firm supporting investment management clients of all sizes and from all locations.