Republicans on the House Financial Services Committee asked the U.S. Securities and Exchange Commission to hold off on proposing a rule to require that brokers adhere to the same fiduciary duty standard as registered investment advisers.
A study released by the SEC in January recommended the commissioners adopt a common standard for both. A group of 14 Republican lawmakers, including Representative Scott Garrett of New Jersey and other senior members of the House committee, sent SEC Chairman Mary Schapiro a letter today urging her to conduct “much more rigorous analysis” and provide “proper analytical justification for action” before considering a rule.
The SEC staff’s fiduciary duty study was mandated by the Dodd-Frank financial services overhaul law enacted on July 21, which also authorized the agency to adopt a rule based on its conclusions. Giving brokers such a standard would require they put their clients’ best interests first at all times. Currently, they are required only to assure that their advice is “suitable” for their clients.
“The Commission has not identified and defined clear problems that would justify a rulemaking and does not have a solid basis upon which to move forward,” today’s letter said, encouraging a “thorough cost-benefit analysis.
The lawmakers said they agree with two Republican SEC commissioners, Kathleen Casey and Troy Paredes, who dissented from the study’s results.
John Nester, an SEC spokesman, said the agency’s staff hasn’t yet made a recommendation to the commission on whether to proceed with the rule.
Labor Department Rule
Three House committee chairmen, including Representative Spencer Bachus of Alabama, who heads House Financial Services, sent a March 15 letter to the Department of Labor and the SEC asking for a delay of a parallel effort by the Labor department. The department proposed a rule in October expanding the definition of fiduciary to designate those giving investment advice about retirement plans as fiduciaries.
If the two agencies don’t coordinate their rules, that letter said, “the result could be an inconsistent, and possibly conflicting, approach.”
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