The SEC this year will continue to consider whether it should "subject broker-dealers to a fiduciary standard" and will hire additional examiners, the head of the agency, Mary Jo White, said this week.
Speaking Thursday at the Investor Advisory Committee's first meeting of the new year, White laid out "what lies ahead in 2015," noting that the agency will also consider obtaining "sufficient funding" for investment advisor exams, enhancing the disclosure of risks in target date funds, and completing the SEC's review of the "accredited investor" definition.
White also reiterated in her comments the measures SEC staffers started developing in December, saying the Division of Investment Management was developing recommendations to address the "increasingly complex portfolio composition and operations of today's asset management industry," which includes requiring advisors to have succession plans.
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She said three of the core initiatives would:
- modernize and enhance data reporting for both funds and investment advisors;
- require registered funds to have controls in place that identify and effectively manage the risks related to the composition of their portfolios, including liquidity and the use of derivatives in the portfolios;
- require investment advisors to create transition plans to prepare for a major disruption in their business that could disable them from serving their clients.
The agency plans to use the $150 million budget boost that it received under the Cromnibus spending bill that passed in December to hire an additional 72 examiners for investment advisors and investment companies in 2015.
The agency also will dedicate $305 million of its budget to its Office of Compliance Inspections and Examinations in 2015. OCIE expects to add 105 examiners total in 2015.
The Cromnibus bill allocated $1.5 billion to the SEC, which is $150 million more than the agency's fiscal 2014 funding level but $200 million less than the $1.7 billion requested by President Obama for 2016.
SEC Commissioner Luis Aguilar earlier this month called on the agency to do more to warn anyone saving for retirement about the "inherent risks" in target-date funds and to require better disclosure rules in municipal bonds.
The "relentless" growth in TDFs is "troubling," Aguilar said, especially because Americans saving for retirement lack a full appreciation for their inherent risk.
The SEC gained authority under the Dodd-Frank Act to impose a fiduciary standard on brokers providing investment advice. Under current law, brokers must sell investments that are suitable for investors, but they don't have the legal duty to put clients' interests first.
Whether the SEC will move ahead with an expansion of the fiduciary standard remains unclear.
"It's something I think is enormously important to do, but the commission has not made a decision about whether to do something or what to do," White said at a Sifma conference in New York last fall.
The Department of Labor was expected last month to send the redraft of its own version of the fiduciary rule to the Office of Management and Budget for review.
Also read: Fighting the fiduciary rule
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Melanie Waddell
Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2024. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.
