Jan 12 (Reuters) - The U.S. Securities and Exchange Commission plans to request more data before finalizing a
proposal requiring a uniform fiduciary standard for investment
advisers and brokers. That could delay the start of the
rulemaking process by another six months, securities industry
observers say.
The process is already behind schedule. The SEC
had previously said it would propose the rule in the second half
of 2011.
SEC staffers are drafting a request to ask the public for
more data to analyze the costs and benefits of an anticipated
proposal that would harmonize duties of care owed to clients by
investment advisers and brokers who give personalized advice,
according to a recent letter from SEC Chairman Mary Schapiro.
"It is our hope that commenters will provide information
that will allow Commission staff to continue to analyze the
various components of the market for retail financial advice,"
Schapiro wrote in the letter to Republican U.S. Congressman
Scott Garrett of New Jersey.
The SEC will likely give the public 45 to 60 days to respond
once it publishes its request, and will need another 45 to 60
days to analyze the additional data, said Lynn Turner, former
SEC chief accountant. The anticipated request could delay the
SEC's unveiling of the controversial proposal until at least
mid-year, Turner said.
An SEC spokesman declined to comment on Turner's
estimate.
A study by SEC staff, released nearly a year ago,
recommended applying a uniform fiduciary standard to investment
advisers and brokers who give personalized advice. The study was
required by the Dodd-Frank financial reform law.
Dodd-Frank also authorized the agency to develop the new
rules, but they are not mandated by the law.
Investment advisers are already subject to a
fiduciary standard, requiring them to act in their clients' best
interests. But brokers are held to a different standard and are
only required to recommend investments that are "suitable,"
based on factors such as the client's age and risk tolerance.
Those recommendations could include a range of products,
including some that compensate the broker more than others.
Some investor advocates prefer the SEC's caution to speed.
"As frustrating as this process is, I think it's a smart route
for the commission to take," said Barbara Roper, director of
investor protection for the Consumer Federation of America, a
Washington, D.C.-based advocacy group. "We want a rule that
could withstand a legal challenge."
Industry groups, including the Securities Industry and
Financial Markets Association (SIFMA), have been pushing for
cost-benefit analyses of various regulatory proposals which
could affect their businesses. Industry observers say the SEC
has also been taking extra precautions since a court blocked a
proposed regulation on proxy access in July because the agency
failed to determine the economic effects of the new rule.
Quantifying the benefits of a uniform fiduciary rule as
compared to existing regulatory standards will be difficult,
said David Tittsworth, executive director of the Investment
Adviser Association.
SEC economists working on the broker fiduciary proposal have
already reviewed and catalogued an array of data about the
market for retail financial advice, including academic articles
and surveys, according to Schapiro's letter.
The next hurdle will be waiting to see what kind of data
emerges, Roper said. Data requests, while announced to the
public, must often be fulfilled using information available
through industry groups, she said.
A SIFMA spokesman declined to comment. A spokesman for
Garrett acknowledged receiving Schapiro's letter on Thursday but
declined further comment.
Requesting additional data doesn't guarantee the SEC will
get the information it wants, Tittsworth said. "But it's
certainly a good-faith effort to try to come up with the best
data possible," he said.
(Reporting By Suzanne Barlyn; Additional reporting by Sarah N.
Lynch)
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