An SEC Rule to Protect Investors Gets Sidelined

A Securities and Exchange Commission proposal that would raise standards of conduct for U.S. brokers who advise individual investors has run aground. Though the agency has been drafting a rule for almost two years, it has scheduled no action on the measure.

The proposed rule would impose a so-called fiduciary standard on brokers, requiring them to put their clients’ interests above their own. Today that principle applies to registered investment advisers, while brokers are required only to promote products suitable for clients. The Dodd-Frank Act of 2010, passed in the wake of the 2008 credit crisis, instructed the SEC to consider mandating that brokers operate under a fiduciary standard as rigorous as the one that applies to investment advisers. SEC Chairman Mary Schapiro, who pushed to include the measure in Dodd-Frank, said other rules will probably take precedence in coming months. “It’s important for us to get this done, but Congress handed us a lot of important things to do,” she says. “We continue to advance this issue within the building and remain committed to it.” The agency is still “steadily working through all the mandated rulemakings,” she says.