SEC opens comment period on possible fiduciary duty rulemaking


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With the first implementation date of the Department of Labor’s Fiduciary Rule upon us, the Securities and Exchange Commission has jumped into the fray, opening a comment period which will influence “possible future actions” the agency may take in codifying advisers’ and broker-dealers’ new fiduciary role. SEC Chairman Jay Clayton’s letter announcing the comment period discusses how the SEC and Department of Labor intend to “engage constructively” regarding the Fiduciary Rule, specifically on how the rule is likely to affect retail investors and entities regulated by the SEC. Included in Commissioner Clayton’s is a lengthy seventeen question request for information. The questions look to better understand trends in fee structure, technological changes for retail investment, means of identifying potential conflicts of interest, and possible remedial measures, among many others.

Intriguingly, the Commissioner’s letter specifically mentions the possibility of a disclosure-based approach to the Fiduciary Rule a number of times, both in the body of the letter and within the questions asked to interested parties. A disclosure-based approach has been suggested as a possible alternative to the Department of Labor’s standards within the industry for some time, and the Commissioner’s letter at least suggests that such an approach remains a possibility.

It is also notable that, as of now, the comment period has no defined length. While the request for information from the SEC was substantial, an open-ended comment period may suggest that the SEC and Department of Labor may be looking to further delay or modify regulations not already in effect, or any new action on the matter. Until Secretary of Labor Jay Acosta published an op-ed in the New York Times on May 22nd, stating that there was “no principled legal basis” to further delay the initial compliance date of the rule, there had been lingering doubt of a further delay. The SEC’s open-ended approach to fiduciary rule does not suggest an expedited process.

If you have any questions about your firm’s current compliance with the Department of Labor’s Fiduciary Rule, or how further developments may affect your business, please contact us today.

 

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