The Senate voted 60-40 Thursday to end weeks of debate on Christopher Dodd’s financial regulatory reform legislation, in what is called a cloture vote. That clears the way for a final vote on the bill within 30 hours. An earlier cloture vote failed Wednesday. Voting in favor were 55 Democrats, the Senate’s two independent senators and three Republicans: Scott Brown (Mass.), Susan Collins (Me.) and Olympia Snowe (Me.).
Hotly debated proposals to extend the fiduciary standard to brokers did not make it into the final version of the legislation, though surprise changes could still slip in before the final vote. Following recent fraud charges against Goldman Sachs, and subsequent hearings in Washington, numerous senators drafted amendments to the current Senate bill that would have applied the fiduciary standard more widely. Still, the issue is far from dead, as Senate and House versions of the bill will still have to be reconciled before a final law is passed.
“On fiduciary duty, my sense is that none of the amendments that we’ve talked about, Collins, Akaka-Menendez, Specter, I don’t expect any of those are going to see the light of day,” said David Tittsworth, executive director of the Investment Advisor Association. “A string of amendments were proposed. But it’s not over until it’s over. It’s possible that they could come up in the 30 hours of debate.”
As it now stands, the Senate bill recommends that the SEC study the issue of fiduciary duty for a year, but does not recommend or require any new rulemaking. A House version of the same bill, passed in December, would require the SEC to draft new rules that would extend the fiduciary standard to brokers when they provide retail financial advice.
“The momentum on this issue shouldn’t be underestimated or completely eradicated,” said Tittsworth. “The senate bill still has to be reconciled with the House bill.” And the subject of fiduciary duty continues to enjoy mainstream media attention, he noted. Yesterday, the New York Times wrote a long article about clients of Goldman Sachs worrying over conflicts of interest at the firm. “So I think that issue is still alive.”
“The insurance industry especially has been particularly effective in arguing for the study and against any SEC rulemaking on fiduciary duty,” he continued. But the fact that the Senate never voted against amendments that would have extended the tougher fiduciary standard to brokers gives that issue a better chance of surviving when the House and Senate bills are finally reconciled.