In connection with the Department of Labor’s (“DOL”) fiduciary rule (the “Fiduciary Rule”), key provisions of which became applicable on June 9, 2017, SEC Chair Jay Clayton issued a public statement seeking retail investors’ (and other interested parties’) views in advance of any “possible” future SEC action in the area.

The Chair said that he welcomed the public’s views on, among other things:

  • Whether there is any confusion among retail investors about the type of professional or firm that is providing investment advice, and the standards of conduct applicable to different types of relationships, and, if so, how to address that confusion;
  • Whether there are any potential conflicts of interest related to the provision of investment advice to retail investors in various circumstances and, if so, whether they have been adequately addressed;
  • How retail investors perceive market developments and advances in technology (g., robo-advisers, FinTech) and the duties that apply when investment advice is provided in new ways;
  • Whether there are any trends in providing retail investment advice toward a fee-based advisory model and away from a commission-based brokerage model;
  • The experience of retail investors and market participants, thus far, in connection with the implementation of the Fiduciary Rule;
  • The benefits and costs of the different standards of conduct for accounts subject to the Fiduciary Rule, as well as existing differences between standards of conduct applicable to broker-dealers and those applicable to investment advisers when providing investment advice;
  • Whether there are particular segments of the market (e.g., smaller and regional broker-dealers and investment advisers or smaller investor accounts) to which the SEC should pay particular attention in considering potential future actions; and
  • If the SEC should proceed with a disclosure-based or a standards-of-conduct approach to potential regulatory action, how these approaches should be implemented and at what pace.

“I look forward to working with my fellow Commissioners, the SEC staff, retail investors, and other market participants in assessing these matters, as well as the range of potential [SEC] actions and their expected effects,” said Chair Clayton.

Submissions can be made in webform and by email to rule-comments@sec.gov (Subject Line: “IA-BD-Conduct Standards”). Comments already received to date are available here.

Our Take

It is not clear whether the SEC will jump into the fray and propose its own fiduciary rule, which would apply to all accounts rather than to ERISA-regulated accounts and IRAs. This latest round of public attention, at the very least, signals the SEC’s continued interest in regulating the standards of conduct for investment advisers and broker-dealers in tandem with the DOL—even if it is still only a “possibility.” Nonetheless, many industry participants do not expect immediate SEC action. After all, as Chair Clayton noted, the SEC has been reviewing this area since 2006