Security - Check Permissions

MFDF - Mutual Fund Directors Forum - SEC Postpones Broker-Dealer Fiduciary Rule

Member Login



Request an account

Sample Banner 2

SEC Postpones Broker-Dealer Fiduciary Rule

In order to perform additional cost-benefit analysis, the SEC is delaying a new rule proposal that would impose a fiduciary duty on broker-dealers.  The rule is authorized by the Dodd-Frank Act and would require broker-dealers to act in the best interest of the customer.  This would hold broker-dealers to a higher standard than their current duty of fair dealing, an important aspect of which is the suitability requirement (generally requiring a broker-dealer to make recommendations that are consistent with the interests of its customer).

In a January 10th letter to Rep. Scott Garrett (R-NJ), Chairman of the House Financial Services Subcommittee on Capital Markets, SEC Chairman Mary Schapiro stated that SEC economists are still gathering, reviewing and analyzing data and information relevant to this rulemaking.  According to a Bloomberg article, the SEC originally planned to issue the proposed fiduciary duty rule in 2011.  In a December interview, Chairman Schapiro said the rule would likely be completed sometime this year instead.  On December 30, it was removed from the rulemaking calendar posted on the agency's website.

The SEC has come under recent fire for perceived shortcomings in its cost-benefit analyses.  For example, last July, a federal court blocked an unrelated SEC rule, stating that the agency failed to fully study the rule's cost to companies.  Meredith Cross, Chief of the SEC's Division of Corporation Finance, said last November that this court ruling had inspired a "redoubling" of agency efforts to study the cost-benefit effects of new rules.