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Regulation and Compliance > Federal Regulation > SEC

2019 IA25 Political Winners

By Melanie Waddell

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While financial deregulation has been a pillar of President Donald Trump’s agenda, broker-dealers and advisors are bracing for a new set of advice-standards regulations from Trump-nominated SEC Chairman Jay Clayton.

Not long after being installed in the Oval Office, Trump directed the Labor Department to review its fiduciary rule and prepare an updated analysis of the “likely impact” of its rule on access to retirement information and financial advice; Labor’s rule would eventually be killed by the U.S. Court of Appeals for the 5th Circuit in June 2018.

Since early 2017, Clayton has put the SEC at the helm of the fiduciary tiller. Beleaguered Labor Secretary Alexander Acosta, another Trump appointee, has remained mum on Labor’s next fiduciary move — the only guidepost being Labor’s fall 2018 reg agenda, which said the department plans to issue a revised final fiduciary rule package this fall.

Industry officials, however, doubt a full-blown fiduciary rule is in Labor’s future. After the final SEC Regulation Best Interest is issued, “There probably isn’t much of a chance that the DOL will propose a new regulation expanding the definition of fiduciary advice, even after the SEC rule is finalized,” said Fred Reish, a partner at Drinker Biddle & Reath.

In Congress, Sen. Elizabeth Warren’s presidential campaign isn’t dampening her penchant for scrutinizing financial regulators. The Massachusetts Democrat, well-known for her consumer-first prowess, hasn’t slowed down in keeping the heat on regulators since making last year’s IA25 list.

After numerous calls for Wells Fargo CEO Tim Sloan to be fired, Warren got her wish in late March when Sloan announced he’d step down. Warren’s response in a tweet: “About damn time.”

Taking SEC Chairman Jay Clayton to task in December over the agency’s Reg BI, Warren argued that the securities regulator should “move away from a disclosure-based approach in your final rule and just adopt a uniform fiduciary standard for both advisors and brokers” as Congress instructed in Section 913 of Dodd-Frank.

Also in late March, Warren sent a letter to FINRA CEO Robert Cook demanding that any revamped broker expungement rules end up being tougher, as broker expungements “are often associated with broker misconduct” and recidivism.

Just in time for tax day, Warren introduced the Tax Filing Simplification Act to ease tax filing for American taxpayers by letting them “simply sign and return a pre-filled tax form, and require the IRS to create a free online tax preparation and filing service,” she said on Twitter.

On the advocacy side of the political world, Dale Brown continues to garner industry accolades. A repeat winner in the IA25, Brown, president and CEO of the Financial Services Institute, has helped lead the charge against various states’ fiduciary measures, arguing they contribute to a “patchwork” of state best-interest rules.

He told Maryland senators in mid-March that FSI had “serious concerns” about the Maryland fiduciary provision. “First, the provision would significantly drive up compliance costs for firms; at some point those costs have to be passed on to investors, and at some point that potentially prices the access and choice of advice out of the reach of Main Street Americans.”

FSI has remained firm in its stance that states should refrain from issuing their own fiduciary rules. Brown told Maryland Senators “to wait on your provision to see what the SEC does in finalizing Regulation Best Interest.”

Maryland’s Senate Finance Committee heeded Brown and other industry trade groups’ call and rejected the state’s proposed fiduciary legislation on April 3. But New Jersey Bureau of Securities moved ahead in proposing its fiduciary rule in mid-April.

Back in Congress, Rep. Maxine Waters, D-Calif., has come out with all guns blazing since taking the helm of the House Financial Services Committee for the 116th Congress.

Donning her consumer-protection mantle, she grilled Sloan, introduced legislation to “reverse damage” to the Consumer Financial Protection Bureau, questioned megabank CEOs on their post Dodd-Frank actions, and promised to keep a watchful eye on regulators — including the SEC’s Reg BI.

Waters told reporters in early March that “when you have investment advisors who are not acting in [consumers’] best interest, but are acting in their own best interest, it does not bode well for our senior investors in particular. So we are going to continue to pay attention to that.”

Honorable mentions in this group include Senate Majority Leader Mitch McConnell, who plans to beat the anti-Medicare-for-all drum in 2020, and Federal Reserve Board Chairman Jerome Powell, who continues to dodge President Trump’s personal attacks. In a recent 60 Minutes interview, Powell stated that one thing Trump can’t say to him is “You’re fired. The law is clear that I have a four-year term. And I fully intend to serve it.”

Melanie Waddell

@Think_MelanieW

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