Rule to raise standards for broker-dealers stalled in SEC

Mary Schapiro

A proposal by the Securities and Exchange Commission to raise standards for brokers who advise retail investors has stalled, with the SEC scheduling no action on the measure for 2012.

Mary Schapiro, the chairwoman of the SEC who pushed for the inclusion of the standards in the 2010 Dodd-Frank Act, said that other rules will take precedence, according to BusinessWeek.

“it’s important for us to get this done, but Congress handed us a lot of important things to do,” Schapiro said, BusinessWeek reports. “We continue to advance this issue within the building and remain committed to it.”

Under Dodd-Frank, the SEC is required to consider a mandatory fiduciary standard for brokers who advise retail investors in order to reduce investor confusion surrounding the roles of both brokers and advisers and to protect U.S. consumers from being overcharged.

Schapiro said that the agency is “steadily working through all the mandated rulemakings.” She faces pressure from advocates of the rule as elections approach. The measure could be tossed out if a new chairman is installed to the regulatory agency after elections, according to BusinessWeek.

Retail investors often trust broker-dealers and investment advisers with their funds. While brokers work on sales commission, registered investment advisers work for established fees and manage portfolios based on customers’ “best interests.”

The Securities Industry and Financial Markets Association, though critical of other Dodd-Frank proposals, expressed support for the measure.

“Sifma is very much in favor of establishing a new uniform fiduciary standard for both brokers and advisers where they’re basically doing the same thing for retail customers,” Ira Hammerman, general counsel for Sifma, said, BusinessWeek reports. “There are literally trillions of dollars of individual savings and investments that we’re talking about here.”

The SEC plans to put the proposal for a uniform fiduciary standard out for public comment on its potential costs. Following a 60- or 90-day comment period, the SEC would then issue a final draft of the rule to be revised before commissioners vote on the measure.

“The industry is not performing up to its potential to serve investors,” John Bogle, founder of mutual fund company Vanguard Group, Inc., said, according to Businessweek.

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