Jay Clayton Copyright Chip Somodevilla, Getty Images
Jay Clayton

SEC Seeks Public Comments on Investment Advice Regulation

A lot has changed since the last time the SEC solicited comments on investment advice standards in 2013. That’s why the new SEC Chairman Jay Clayton believes it’s time to do so again.

While the Department of Labor’s fiduciary rule takes effect next Friday, the Securities and Exchange Commission is asking the public for help shaping future regulations for the investment advice industry. The last time the agency issued such a request for information was in 2013, when it collected data and information related to the rules governing investment advisors and broker/dealers. A lot has changed since.

“Significant developments in the marketplace since the Commission last solicited information from the public in 2013 include financial innovations, changes to investment advisor and broker/dealer business models, and regulatory developments — including the issuance and pending applicability of the Department of Labor's Fiduciary Rule,” SEC Chairman Jay Clayton said in a public statement. “In light of these developments, I believe an updated assessment of the current regulatory framework, the current state of the market for retail investment advice and market trends is important to the Commission's ability to evaluate the range of potential regulatory actions.”

In his op-ed announcing that the DOL would not further delay the applicability date of its fiduciary rule, Secretary of Labor Alexander Acosta said he hoped the SEC would move forward with its fiduciary standard rulemaking. The SEC was given authority to do so in the Dodd-Frank Act.

The SEC has made a webform and email box available for the public to submit comments.

The request included a series of questions related to financial advice standards and investor views of retail financial advisors. They address confusion over the types of financial services firms and advisor roles. The agency asks whether conflicts of interest have been appropriately identified and addressed, and how investors perceive the advice they receive through technological advances, such as robo advisors. The questions cover the trend away from a commission-based approach toward the fee-based model and how people are defining “retail investors” and “investment advice.”

They also ask about the public’s experience with the DOL’s fiduciary rule thus far and whether the SEC should take it into account in developing its own standards for retail investment advice. The request asks whether the SEC should pay special attention to certain segments of the market, such as smaller firms and accounts, in its consideration of regulatory action. The request also addresses disclosure-based versus standards-of-conduct-based approaches to regulating the industry and how such approaches would be implemented.

The SEC also wants to know what costs and benefits to take into account, and whether other countries’ approaches should inform standards here in the states.

“I believe clarity, consistency [and coordination] are key elements of effective oversight and regulation,” Clayton said. “We should have these elements in mind as we strive to best serve the interests of our nation's retail investors in this important area.”

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