The Securities and Exchange Commission will codify a proposed uniform fiduciary standard by the fall of 2016, according to the agency's agenda for the next year, published with the Office of Management and Budget.
It is one of more than 30 rules officially designated as being in the "proposed" stage, according to documents published by the OMB.
In recent testimony before the Committee on Financial Services in the U.S. House of Representatives, SEC Chair Mary Jo White informed lawmakers that the agency would "catalyze consideration" of a uniform fiduciary duty for investment advisers and broker-dealers.
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The period of proposed rulemaking will produce just that—a proposal. Any proposal that emerges by October 2016 will have to then go through a final rule stage before the four appointed SEC commissioners and Chair White vote it on.
Underscoring what she has previously said publicly, Chair White told lawmakers in her Congressional testimony that she backs the issuance of a uniform standard.
"The differences in the standards that apply to advice under the federal securities laws has led me to conclude that broker-dealers and investment advisers should be subject to a uniform fiduciary standard of conduct when providing personalized investment advice about securities to retail investors," she testified.
"I recognize that this is a complex issue, and that there are significant challenges that will need to be addressed in proposing a uniform fiduciary standard, including how to define the standard, how it would affect current business practices, and the nature of the potential effects on investors, particularly retail investors," added Chair White.
Section 913 of the Dodd Frank Act, which President Obama signed into law in July 2010, gives the SEC authority to adopt a uniform fiduciary standard for all broker-dealers and advisers giving investment advice or selling investment products.
Critics of the SEC—some of them elected lawmakers—have argued the agency has dragged its feet on the rulemaking. SEC staff issued a study on the issue, as directed by Dodd Frank, in 2011. In 2013, the agency put the matter out for public comment.
The 2011 study recommended the SEC adopt a uniform fiduciary rule for all brokers that is "no less stringent" than the fiduciary standard governing RIAs as stated in the 1940 Investment Advisors Act.
Chair White told lawmakers that she and her staff are considering the recommendations in that report.
But at least one SEC staff member has gone on the record saying that language in Dodd Frank may neuter the SEC's capability to finalize a strong fiduciary rule.
This summer, Rick Fleming, the Investor Advocate at the SEC, a position also created by Dodd Frank, wrote in his annual report to Congress that language in Dodd Frank may prevent the SEC from creating a standard that outlaws commissions on investment products and the selling of proprietary investment products.
Fleming also wrote that Dodd Frank might prevent the SEC from writing a rule that requires an ongoing standard of care.
That restrictive language could lead to an "ill-advised SEC rule" that "could be worse than no rule at all," advised Fleming in his report.
Opponents of the Department of Labor's proposed fiduciary rule, which would make commission-based compensation and the selling of proprietary investments considerably more difficult for brokers, have hoped for years to circumvent the DOL by requiring the SEC to be the lead rule maker on a uniform fiduciary standard.
Recently, the Retail Investor Protection act, which would require the SEC to first post its rule before the DOL finalized its rule, passed the House of Representatives.
But the Senate has so far not indicated its willingness to take the law up in its chamber. And the White House swiftly vowed to veto the bill after it passed the House.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
