Dec 19 Developing new U.S. securities industry
regulations may stretch well into 2013, or even beyond, but the
delays do not trouble Chet Helck.
Indeed, the chairman of the Securities Industry and
Financial Markets Association, or SIFMA, says that rushing the
process - just to finish regulations required by the Dodd-Frank
financial reform law and other legislation - could trigger more
Speed versus deliberation is just one of the tough topics
facing Wall Street next year. Other concerns include the impact
of new and proposed regulations on brokers, and how best to
streamline some of the varied rules that apply to different
types of financial advisers, SIFMA's chairman told Reuters in an
The concerns come after the Dodd-Frank financial reform law
and other legislation required and authorized certain federal
agencies, including the U.S. Securities and Exchange Commission,
to develop rules that affect everything from sales of
unregistered securities to changes in ethical standards for
SIFMA, a major Wall Street trade and advocacy group, has
been deeply involved in many of those discussions, pushing
regulators to craft some points in ways that the industry says
will be more practical for it to implement.
Helck, who is also chief executive of the Global Private
Client Group of Raymond James Financial Inc, says the
conversations will continue for as long as it takes to get the
He spoke with Reuters about the industry's 2013 regulatory
landscape. Excerpts of the interview follow.
Q: What is the biggest regulatory challenge facing the
retail brokerage industry during 2013?
A: Our industry has evolved and grown well past the
regulatory framework which we've lived under since the 1930s.
Markets, technology, products, economies - everything has
changed so dramatically. And the regulation just hadn't evolved
to keep up.
Q: The departure of former SEC chairman Mary Schapiro means
the agency will begin 2013 with four commissioners. Could that
slow Dodd-Frank reforms?
A: Only about a third of the required rules for Dodd-Frank
have been done, so the vast majority is still in front of us. It
is late, but frankly, it's important to go through this in a
thoughtful and considered way.
If they make rules just to make them on time, and those
rules don't work, it can lead to the same types of dislocation
that having no regulation would bring.
Q: Financial Industry Regulatory Authority has a new rule in
which brokerages must make sure their recommendations for
investors are suitable at all times, not just when the
transaction takes place. How will that affect
the industry during 2013?
A: These rules are directed toward making sure that the
financial adviser knows the client well enough to (ensure) that
whatever they're advising is not only suitable, but the best
option they can come up with for that client.
There are many advisers where that's the predominant
culture. If you've always done it that way, it's not a big
change. If you're the product-driven person who has pitched
products with no real assumption of responsibility for helping
clients determine it's their best choice, then it may be a big
change for you.
Q: Many advisers are leaving brokerages, where they are
regulated by FINRA, to become registered investment advisers who
are regulated by the SEC or states. Does this concern you?
A: Most advisers who leave keep their brokerage licenses
and also work as registered investment advisers in a hybrid
model. But it concerns me that there is an unleveled playing
field on the regulatory front (for different types of advisers).
FINRA (which oversees the U.S. brokerage industry) is a
tough regulator, so I understand why some find it challenging
and costly to meet all the requirements. However, the public
deserves to have the same protections regardless of an adviser's
There is a need to harmonize the regulatory framework so
that we have the same consistent high level of care for clients
who receive the same services by advisers, regardless of their
business model. I think it will happen. I don't know whether it
will be completed in 2013.
Q: Financial advisers are facing uncertainty about the
"fiscal cliff" - a combination of numerous tax and government
spending cuts that are expiring, and which could affect the
economy in 2013 and beyond. Is it possible for advisers to
recommend strategies for clients to plan for so many potential
A: Absolutely. Can you prepare for it perfectly? Never.
Preparing for it perfectly means being able to guess the outcome
and doing exactly what can optimize the outcome. You never can
do that. Diversification gives you a less-than-optimal result
but it also protects you from a devastating result. And that's
the best you can hope for. Clients have to deal with this
uncertainty whether they want to or not.