Fiduciary Links: Mary Jo White’s Honeymoon Short-lived?
Posted by Duane Thompson on May 20, 2013
>>>>New SEC Chairman Mary Jo White’s honeymoon with Congress may be rapidly drawing to a close. Not that it was expected to last forever. Last week the former Wall Street lawyer, in office for only a month, testified before the House Committee on Financial Services about the need for more resources to examine investment advisers. The SEC’s fiscal year 2014 budget would add 325 IA examiners, or nearly half of all new staff hires at the Commission. About 250 of the examiners would inspect traditional advisers with the remainder focused on advisors to newly registered hedge and private equity funds.
Adding a political wrinkle to the hearing was former committee chairman Spencer Bachus’s comments that it would be “pennywise and pound-foolish for there not to be some bipartisan agreement for a [SEC] funding increase.” Bachus was the primary backer of a bill last year to create a private sector self-regulatory organization for investment advisers, most likely administered by FINRA, the SRO for broker-dealers. A statement by Bachus in support of increased SEC funding, rather than for a privately funded SRO, is another signal that the House GOP has little appetite to expand FINRA’s jurisdiction to investment advisers – at least for now.
However, it’s not likely the SEC will get the 18 percent increase in funding for a 2014 budget of $1.674 billion that the Obama Administration is asking for the Commission. Part of White’s plea for more examiners has to do with the sudden influx of 1,500 new hedge and private fund advisors since the Dodd-Frank reform act added the new registration requirement, and the fact that only one in 10 advisors registered with the Commission are inspected each year. Dodd-Frank was supposed to alleviate some of the strain on SEC resources by de-registering some 4,000 smaller investment advisers, and relegating them state oversight. However, only about 2,000 actually de-registered from the SEC. In reality, this trade-off leaves the SEC with fewer resources, given the complexity and time consumed in private fund inspections.
In addition to likely shunning the SEC’s full budget request, the House passed a bill (H.R. 1062) May 17, by a largely partisan vote of 235-161, requiring the SEC to enhance its economic analysis of new regulatory proposals. A recent impasse with the courts over legal challenges involving other cost-benefits analyses by the SEC has left an anticipated fiduciary rule for brokers in limbo. The Obama administration and SEC chairman oppose the House bill, signaling the end of the honeymoon of Mary Jo White with House Republicans, if there ever was one.
Now on to the rest of the best links from last week:
News and columns from the leading trade, consumer, and mainstream media:
- Congress to require DOL-SEC to coordinate on fiduciary rulemaking? [InvestmentNews]
- Rule change in Social Security leaves some stranded. [InvestmentNews]
- Fewer advisers switched to state oversight than was anticipated when the Dodd-Frank financial reform law was enacted three years ago. [InvestmentNews]
- The SEC's first priority is more adviser examinations, says White [InvestmentNews]
- Self-directed retirement funds offer great flexibility, but require special due diligence for most and are ripe for fraud. [WSJonline]
- Generational Dependence: More families are supporting adult children and aging parents, which causes a complete rewrite of the financial planning. [Wealth&Management]
From the organizations/associations/government/academia:
- CEFEX now offers a new Electronic Assessment Form (EAF) to aid in working toward the CEFEX certification.[CEFEX]
- Mary Jo White's testimony on the oversign of the SEC before the U.S. House of Representatives Committee on Financial Services. [House Financial Services Committee]
- The SEC 2014 Budget Request [SEC]
- Justin Fox looks at how growth in the size of the asset management industry has outstripped the value of the market and asks, "just how useless is the asset management industry?"
From the blogs:
- What would Adam Smith say about the Fiduciary Standard? [Scholarly Financial Planner]
- Ron Rhoades makes the case that there is both a legal and economic imperative for the DOL to adopt its broader fiduciary rule [Scholarly Financial Planner]
- Fiduciary Obligation to Select Appropriate Share Classes [FredReish]
- Trending Topics for ERISA Plan Sponsors [FiduciaryNews]
- A case study on the new rules of early Social Security payments and repayment, with a broader lesson on paying attention to rule changes [IN's Retirement 2.0]
Articles your clients are reading (or should be):
- How to Choose a Financial/Investment Advisor: A Checklist for Consumers. [Scholarly Financial Planner]
- Share this with your clients to show them just how damaging hidden 401(k) fees can be and the importance of fiduciary advice. [NPR]
- Why I rolled over my 401(k) to an IRA [USNews]
- Investing: Even indexing takes work [The Chicago Financial Planner]
Have a link we missed? Leave them in the comments section or email us at blog@fi360.com. For more of the best links during the week, make sure you follow us on Twitter.
