Ken Bentsen

Looking Forward: Heavy Regulatory Burden Still Resting on Firms

SIFMA's new CEO talks about changes in the organization and the regulatory landscape

While it looks as though the big regulatory issues affecting advisors are on the back burner, advisors still face heavy regulatory burdens in the year ahead, says Kenneth Bentsen, president and CEO of SIFMA. Bentsen is taking on the role of chief executive of SIFMA after former Senator Judd Gregg stepped down last week. Bentsen talks about SIFMA’s future, what regulatory issues are on the horizon and what type of legislation the industry should watch for in the coming months. What’s up next for SIFMA? Will Gregg’s departure impact the initiative he spearheaded to educate Main Street investors on the importance of the financial markets?

Kenneth Bentsen: No, it will continue to be among the highest of priorities. And we’re fortunate that Judd has agreed to serve as a senior advisor. That's a critical initiative of our board of directors—it’s the Chet Helcks and Jim Rosenthals [SIFMA’s past and present chairmen] who are the market participants and the real driving force on this issue. Across the board, regardless of the firm, it’s a unifying theme. We’re also looking at working on how we relate to customers, as well as customer rights and responsibilities and business continuity issues. And we’re working with the foundation to enhance education around capital markets.

WM: What regulatory issues should advisors be concerned about in the next six months?

Bentsen: There’s a lot still out there, and financial advisors, both institutional and retail, are seeing activity. The Department of Labor’s ERISA fiduciary re-proposal staying out there, the agency is still doing analytical work. And we expect to see the money market fund rule soon from the Securities and Exchange Commission. This will have a larger impact on the producers, originators of the funds, but it could impact the structure of the funds and by extension, advisors.

WM: What about outside the SEC and DOL?

Bentsen: Outside Dodd Frank, there’s activity going on at FINRA. They have a large agenda, including a rule on broker bonus compensation that we’re following closely. They are also heavily engaged in supervision.

WM: What about state regulators? With many smaller advisors not falling under state jurisdiction, are there any major issues the states are looking at?

Bentsen: States have been onboarding regulated advisors, expanding their class of advisors. It’s a new area for some, and the programs vary state by state, with some even considering getting outside help. They’re trying to get a balance between supervision and enforcement.

WM: Will advisors see anything come out of Congress in the coming months? There have been a few bills proposed this year, but with the tricky Congressional environment currently in place, not a lot of action has been made here.

Bentsen: Tricky is putting it nicely, as some have called it dysfunctional. Congress will continue its oversight, but it’s hard to get things through. The biggest thing on the horizon right now—which has a 50-50 chance at best right now—is tax reform. Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Dave Camp (R-Mich.) have laid out a plan, but haven’t shared it publically yet, although they have released disclosure drafts. The tax treatment of financial products like municipal securities and tax treatment of deferred savings of retirement could have impact. Even reforms on more arcane issues could have broad implications. But we’re heading into an election year and tax reform is always a tough vote. Yet you’ve got a strong-willed chair so we’ll have to see.

WM: Any other issues advisors and their firms should be watching over the next few months?

Bentsen: Housing finance and reform is another issue—it’s already at the first steps in the House, and Bob Corker (R-Tenn.) and Mark R. Warner (D-Va.) are working on it in the Senate. Were it to go the distance, it could have an impact on the future of mortgage-backed securities. There’s also an increased focus on equity market issues, starting with the flash crash up to now. Regulators are taking a harder look at it and expect that to continue. 

Overall for the industry, we’re still in a period where we have a tremendous amount of new regulation being promulgated and implemented, and that will continue to be a heavy burden for firms. This industry has always been highly regulated and we will adapt. 

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