Clayton promises ‘not to take forever’ on SEC advice rule
Following Capitol Hill testimony, top regulator declines to say whether he will extend comment deadline on proposed reform package.
Securities and Exchange Commission chairman Jay Clayton said Tuesday the agency is “not going to take forever” to complete investment advice reform regulations, but declined to say whether he’s willing to extend the comment deadline on the package.
In testimony before a Senate Appropriations subcommittee, Mr. Clayton did not provide a time line for completion of the proposal, which was released in April and has an Aug. 7 comment deadline.
“I’m not going to take forever,” Mr. Clayton said in response to the subcommittee chairman, Sen. James Lankford, R-Okla. “It’s time to bring a focal point for many regulators in this space.”
After the hearing, Mr. Clayton did not say how he would respond to recent requests from more than two dozen investor and adviser advocacy groups to extend the comment deadline on the proposal.
The groups argue that more time is needed for the agency to conduct investor testing related to disclosures being proposed that would help investors understand the differences between investment advisers and brokers. They’ve also asked the SEC to make the testing results public.
In a meeting with reporters after the Senate hearing, Mr. Clayton sidestepped both requests.
“Let’s see what happens during the process,” Mr. Clayton said.
The SEC has taken the lead from the Labor Department on setting investment advice standards, as the DOL fiduciary rule appears to be near death after a federal court struck it down.
The SEC’s proposal includes a regulation that would require brokers to act in the best interests of their clients and mandatory disclosures for investment advisers and brokers that outline their fees, services and care requirements.
In his testimony, Mr. Clayton reiterated that the SEC is trying to ensure that investors will receive advice that is in their best interests, whether they work with a broker, who is currently held to a less-stringent suitability standard, or an investment adviser, who already must provide a fiduciary standard of care.
The SEC aims to “significantly enhance retail investor protection” while maintaining both advice options, Mr. Clayton said.
“Both of these models have served us well,” he said. “We want to keep them and clarify them.”
ADVISER EXAMS
Mr. Clayton also told lawmakers the agency has stepped up its oversight of registered investment advisers and would do more with a bigger budget. He said the SEC examined 15% of the approximately 12,000 RIAs in fiscal year 2017, a 40% increase accomplished through better use of current resources.
The agency is seeking a $6 million budget increase in fiscal 2019 to $1.658 billion. With more funding, Mr. Clayton said the agency could hire 24 more personnel in the Office of Compliance Inspections and Examinations.
“We’re doing a lot with risk-based inspections, but we need smart, competent people to do it,” he said.
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