The SEC’s delay in adopting an uniform fiduciary duty will only be prolonged but yet another analysis that the SEC will commission. Chairman Schapiro recently announced plans to issue a public request for information regarding “retail financial advice and the regulatory alternatives”. With respect to the adoption of the uniform fiduciary duty standard, the SEC suggested that it was still in the information gathering stage of rule-making. Interpretation; the SEC is no closer to adopting a uniform fiduciary duty standard. Although the SEC has not ruled rule-making for 2012, it is not likely.
The SEC has advised the House Financial Services CapitalMarkets subcommittee that it has three economists working on the initiative. Among other things, the economists have reviewed available market information for the retail financial advice market, including the differences between broker-dealers and registered investments advisers. Notwithstanding the work of the economists to date, the SEC noted that the rule-making associated with the uniform fiduciary duty will require an analysis of information that may not be publicly available such that it will be particularly important for the SEC to solicit the public to provide information and/or empirical data.
Of the information that the SEC will seek in its public request for information, broker-dealers should expect that some of the data sought will cover a cost-benefit analysis of whether the adoption of a uniform standard will outweigh the cost of doing so. Although delayed, the SEC is, it appears, trying to have a full and complete analysis to ultimately justify a uniform fiduciary duty. In light of the manner in which many courts and arbitration panels treat broker-dealers, this whole exercise could be seen as making something “official” that has already been in place for many years. The question that remains is whether the cost to make the standard an “official” one is worth it considering the prevailing view of many that it may already exist.