Republican members of the House Financial Services Committee have urged the Securities and Exchange Commission not to move forward with a universal fiduciary standard.
In a letter to SEC chairman Mary Schapiro dated March 17, 14 GOP members, led by chairman of the Capital Markets Subcommittee Rep. Scott Garrett, wrote, "It is our view that the commission has not identified and defined clear problems that would justify a rulemaking, and does not have a solid basis upon which to move forward."
The letter was in response to a January report, mandated by Dodd-Frank and released by the SEC, which recommended that a universal fiduciary standard of care be created to protect investors. The report claimed investors could easily be confused by the current rules, which state that advisors must give advice that's in the client's best interest, while broker-dealers must give guidance that is suitable for an investor's needs, timelines, and risk appetite.
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Although the Dodd-Frank gives the SEC authority to provide rulemaking on fiduciary duty, House Republicans believe "a much stronger analytical and empirical foundation than provided by the study is required" before the SEC should proceed with the rulemaking.
Two Republican Commissioners of the SEC, Kathleen Casey and Troy Paredes, agreed with their House party members, and requested in the SEC report that a cost-benefit analysis be completed.
The GOP also asked the SEC to take into account how a universal standard of care would align with the fiduciary rule the Department of Labor is writing under federal retirement law.
Additionally, the letter urged the SEC to consider a staff report about investment adviser oversight. That report, also released in January and mandated by Dodd-Frank, gave three recommendations to increase adviser examinations: authorize the SEC to charge user fees to fund monitoring, establish a self-regulatory organization, and allow FINRA to expand its jurisdiction to include advisers who are also registered as broker-dealers.
The Republicans added that they plan to hold a hearing "in the coming weeks" to discuss the fiduciary issue.
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