On Wednesday, the SEC commissioners voted 4-1 to propose two rules and an interpretation designed to “enhance the quality and transparency of investors’ relationships with investment advisers and broker-dealers, while preserving access to a variety of types of advice relationships and investment products”.
The lone dissenting commissioner, Kara Stein, voted against her colleagues as “despite the hype, [the] proposals fail to provide comprehensive reform or adequately enhance existing rules”.
The three remaining commissioners, excluding chairman Jay Clayton, expressed misgivings about various aspects of the proposals, but voted in favour as they hoped the public comment process would improve the regulations, reports news publication and financial adviser network On Wall Street.
However, trade groups representing brokers, financial firms, mutual fund companies and insurers were generally pleased with the proposal, reports Bloomberg.
Department of Labor overreach
The SEC’s proposal follows a legal blow against the fiduciary rule in mid-March.
Introduced by the US Department of Labor (DoL) in 2016, the fiduciary rule sought to curb conflicts of interest among advisers and obligate them to act in the best interests of their clients.
The US Chamber of Commerce and the Securities Industry Financial Markets Association, among others, argued that the rule was too burdensome and would make advice too costly, reports newswire Reuters.
Supporters, however, said it forced advisers and brokers to put their clients’ best interests first.
One appeal court judge determined that the DoL had acted “unreasonably” when it expanded the 40-year-old definition of “invest advice fiduciary”.
The fiduciary rule was voided by two votes to one and is currently in limbo, with federal regulators stating that they are not enforcing it.
