The acting head of the Securities
and Exchange Commission blasted a regulation opposed by stockbrokers and the
Trump administration, saying the rule was written to “increase profits” for
Michael Piwowar Thursday added
his voice to a strident debate over the future of the retirement-savings
regulation known as the “fiduciary” rule. The Labor Department plans to delay
the rule by 60 days, setting the stage for its repeal or considerable revision.
Mr. Piwowar said the rule was
“highly political” and was “never about investor protection.”
The regulation, widely opposed by
Republicans in Congress, would hold brokers to a higher standard when they
advise investors saving for retirement. Under the rule, investors using
individual retirement accounts would have a new right to sue brokers who don’t
adhere to the best-interest standard. Wall Street groups have said the SEC
should have written the rule because the agency oversees all of Wall Street,
not only retirement accounts such as IRAs and 401Ks.
“I have a very nuanced view of
the DOL fiduciary-duty rule,” Mr. Piwowar said at a conference sponsored by the
Investment Adviser Association. “I think it is a terrible, horrible, no good,
very bad rule.”
Mr. Piwowar’s comments show how
unlikely the SEC is to propose stricter standards for brokers even if the Labor
Department’s effort is rescinded.
If the SEC were to draft its own
version of the rule, the commission should focus its efforts much more
narrowly, perhaps by restricting the practice of brokers holding themselves out
as “financial advisers,” Mr. Piwowar said. The title may confuse investors who
don’t understand that the person might be a broker, not an investment adviser,
who is held to a higher standard under the law, he said.
“If someone calls themselves a
financial adviser, that means absolutely nothing,” he said.
Under federal law, investment
advisers must put their clients’ interest ahead of their own financial gain.
Brokers are held to a lower standard of care, known as suitability, that says
investment recommendations must fit a client’s goals or risk tolerance.
Mr. Piwowar also said he wasn’t
“enamored with” a proposal—floated by former Chairman Mary Jo White—to
outsource some exams of investment advisers.
Lacking enough manpower, the SEC
only examines about 11% of all advisers annually for compliance with federal
securities laws. The SEC has never examined thousands of money managers it
oversees, despite adding scores of examiners and doubling its spending over the
last 13 years.
Using outside examiners, such as
audit firms, would require the SEC to beef up its own oversight of those third
parties, he said.
“It’s not a free lunch,” he said.
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