Regulatory Reform: Delay or Destruction?

10 Democrats in the US Senate are calling on the Obama Administration to delay a proposal by the Department of Labor involving retirement plan-related investment advice until after the SEC makes a decision over whether to put out its own proposal about retail investment advice. The Commission is looking at whether it should propose a rule that would up the standard for brokers who give this type of advice. The lawmakers are worried that the two rules might conflict and obligate investment advisers and brokers to satisfy two standards.

Meantime, the Labor Department is getting ready to once more propose a rule that would broaden what “fiduciary” means for anyone that gives investment advice about retirement plans. Its previous proposal in 2010 met with resistance from the industry and some members of Congress. Even now there are also Republican lawmakers that want the DOL to wait until after the SEC makes a decision.

Commission Chairman Mary Jo White says she would like the agency to make this decision as “as quickly as we can.” Also, earlier this month she said it would be “premature” to talk about whether the regulator will change or withdraw a recent proposal to amend Regulation D to improve requirement for companies wanting a more relaxed general solicitation arena.

In a letter to House Financial Services Capital Markets Subcommittee Chairman/Rep. Scott Garrett (R-N.J.), White said the proposal is still subject to comment and it was too early to talk about what the SEC might do. Garrett and Financial Services Oversight Subcommittee Chairman Patrick White had written her following the Commission’s proposal to up Reg D requirements for companies wanting to employ general solicitation in private offerings.

The SEC put out the proposal on the same day that it adopted rules regarding private placement and general solicitation, per the Jumpstart Our Business Startups Act. Contending that the proposed amendments violate the JOBS Act, Reps. White and Garrett want them withdrawn. For example, the proposed changes would mandate that issuers submit notice, via Form D, 15 days before advertising offerings.

The two men say that imposing this type of waiting period on solicitation violates the Act. In response, Commission Chairman White said their concerns would be noted in the SEC’s comment file.

Earlier this week US President Barack Obama met with Federal Reserve Chairman Ben Bernanke and other senior regulators and called for the full implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to officials, while Mr. Obama praised the regulators for all the work they’ve done up to now to implement the act’s reforms and consumer protections, he made it clear that they need to complete implementing all the reforms that have yet to be set in place. Regulators have been challenged with finishing up the rules needed to fully implement the law, touted as the most important reform of the country’s financial sector since the 1930’s.

The SSEK Partners Group is a securities law firm that represents institutional clients and high net worth individuals with financial fraud claims. Contact our securities fraud attorneys today.

Senate Democrats urge delay in Labor fiduciary-duty rules, Investment News, August 6, 2013

Obama Meets With Financial Regulators on Dodd-Frank Progress, Bloomberg, August 19, 2013

The Dodd-Frank Wall Street Reform and Consumer Protection Act (PDF)

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