Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, September 19, 2011

SEC & DOL Back Off on Moving Forward in 2011 on Proposals for Fiduciary Duty

It appears that the SEC has responded to growing criticism that proposing a uniform fiduciary duty standard for securities professionals is "premature" until the agency has conducted more cost-benefit analysis to justify adoption of a rule.  Many (including SEC Commissioner Paredes) have stated that the agency has not yet shown that different standards of care for securities professionals have resulted in harm to investors, even if it has resulted in investor confusion.  Investment News reports that an SEC insider confirms the delay; Don't expect fiduciary proposal this year: SEC insider.

In addition, the U.S. Dept of Labor's EBSA released a statement today that it will re-propose its controversial definition of a fiduciary, in part in response to requests from the public and members of Congress that the agency allow additional time for imput.  The release states that:

Specifically, the agency anticipates revising provisions of the rule including, but not restricted to, clarifying that fiduciary advice is limited to individualized advice directed to specific parties, responding to concerns about the application of the regulation to routine appraisals and clarifying the limits of the rule's application to arm's length commercial transactions, such as swap transactions.

Also anticipated are exemptions addressing concerns about the impact of the new regulation on the current fee practices of brokers and advisers, and clarifying the continued applicability of exemptions that have long been in existence that allow brokers to receive commissions in connection with mutual funds, stocks and insurance products. The agency will carefully craft new or amended exemptions that can best preserve beneficial fee practices, while at the same time protecting plan participants and individual retirement account owners from abusive practices and conflicted advice.

EBSA says it will continue to coordinate with the SEC and CFTC and expects to issue a new proposed rule in early 2012.

Other Regulatory Action, SEC Action | Permalink

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