Should the DOL Fiduciary Duty Rule be Rescinded While the SEC Ponders its Own Standard?

On June 1, 2017, the Securities and Exchange Commission requested input regarding the DOL Fiduciary Duty Rule and the SEC’s development of its own fiduciary standard governing investment advice to retail investors. To view Chair Clayton’s public statement requesting Public Comments from Retail Investors and Other Interested Parties on Standards of Conduct for Investment Advisers and Broker-Dealers, click here.

In the public statement, Chair Clayton remarked: “The [DOL’s] Fiduciary Rule may have significant effects on retail investors and entities regulated by the SEC. It also may have broader effects on our capital markets. Many of these matters fall within the SEC’s mission of protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation.” Chair Clayton stressed the need for intergovernmental coordination and “robust, substantive input that will advance and inform the SEC’s assessment of possible future actions.”

Curiously, the SEC did not specify a deadline for the requested input, which raises the question: Just how long is this analysis going to take? After all, the RAND study concluded almost ten years ago. And, the DOL Fiduciary Duty is scheduled for full implementation on January 1, 2018.

In our view, the SEC’s reasoning leads to one, and only one conclusion: The DOL Rule should be rescinded until the Commission completes its analysis and there has been full and complete intra-agency review and publication of (a) whether there should be a uniform fiduciary duty standard and, if so, (b) its scope. The Commission is charged with regulation of our capital markets, of which retirement accounts are only a part.

Otherwise, chaos will reign and the retail investor will ultimately suffer, as “orderly disorder is based on careful division.”

About Frank Taylor

Frank Taylor is head of the Briggs and Morgan’s Financial Markets group and has more than 35 years of experience in complex financial markets litigation, class actions, regulatory investigations, enforcement proceedings and market conduct examinations. Frank has defended clients in some of the financial services industry’s most significant cases. To date, he has served as lead trial counsel in more than 100 class actions and has tried more than 350 matters to verdict, judgment or award in 42 states before federal, state and arbitration forums. Frank focuses his practice in counseling and representation of firms in various financial markets; complex litigation and arbitration in the financial markets; alternative dispute resolution; class action defense; regulatory investigations, enforcement proceedings and market conduct examinations; antitrust; and complex business disputes.
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