SIFMA expects movement on U.S. SEC's broker fiduciary plan

Wed Jan 16, 2013 11:49am EST

Jan 16 (Reuters) - More details about a plan to require beefed-up ethical standards for brokerage firm advisers could emerge by the end of March, securities industry leaders said on Wednesday.

The Securities Industry and Financial Markets Association, a trade group, expects movement by the top U.S. securities regulator in the coming months on a plan that would require advisers to act as fiduciaries, or in their clients' best interest, according to Kenneth Bentsen, Jr. SIMFA's head of public policy and advocacy.

But it is unclear how the U.S. Securities and Exchange Commission, which is developing the plan, will convey new details, Bentsen said during a briefing to reporters about securities industry priorities for 2013. The SEC could issue a draft proposal or may request information from the industry to analyze costs and benefits stemming from the plan, he said.

At issue is a long-running controversy about the differences in responsibilities toward clients for securities brokers, who register with the Financial Industry Regulatory Authority (FINRA), and registered investment advisers (RIAs), another type of financial adviser that is overseen by the SEC.

While RIAs must act as fiduciaries - that is, putting the best interest of clients first at all times - brokers now need only recommend securities that are "suitable" for clients, based on factors such as risk tolerance and age. For example, they can sell a product on which they earn a bigger commission if it meets the criteria, even if an equivalent product is cheaper or has a better performance track record.

The recent departure of SEC Chairwoman Mary Schapiro, however, could be a stumbling block toward finalizing any proposal, industry professionals say. President Barack Obama appointed SEC Commissioner Elisse Walter as chair after Schapiro's departure. [ID nL1E8MQ73H]

But the agency now has four commissioners instead of five - a make-up that can lead to ties when commissioners vote on proposed rules. It not known when the administration will appoint a fifth commissioner.

There is, nonetheless, a "will" at the agency to complete the proposal, Bentsen said.

An SEC spokesman declined to comment on Bentsen's remarks.

The planned proposal is already behind schedule. An SEC plan to amass more industry data for the proposal was also discussed in January 2012.

SIFMA also expects the Department of Labor to re-propose a controversial rule by mid-year that would impose a higher fiduciary standard of care on advisers serving retirement plans.

The department in September 2011 withdrew an initial rule it proposed in 2010 after industry groups and lawmakers expressed continued concerns about costs to the industry and whether the new rule would clash with the SEC's separate fiduciary proposal.

A Department of Labor regulatory schedule lists early July as an anticipated reproposal date.