Mary Jo White last week promised lawmakers that under her leadership, the Securities and Exchange Commission will take into account the potential market impact of raising investment advice standards for brokers before proposing a regulation to do so.
During her confirmation hearing before the Senate Banking Committee last Tuesday, the top Republican on the panel, Sen. Michael Crapo of Idaho, pressed her regarding a cost-benefit analysis that the SEC began March 1.
The 72-page document is a request for information from investors, other market participants and experts that will be used to assess the effect of imposing on brokers the same fiduciary requirement that financial advisers must now meet when providing retail advice — acting in the best interests of their clients.
“Will you commit to reviewing the findings of the request prior to engaging in any rule making?” Mr. Crapo asked.
Ms. White quickly reassured him.
“Absolutely,” she said. “I think it's a very important area and I do commit to doing that.”
Like other Republicans skeptical of a uniform fiduciary duty, Mr. Crapo has been urging the SEC to conduct a thorough cost-benefit analysis. The Dodd-Frank financial reform law gave the SEC the option to promulgate a fiduciary rule but did not mandate one.
In her opening statement, Ms. White said that “standards and regulations governing the conduct of broker-dealers and investment advisers” would be one of several issues she would pursue.
“If confirmed, I would focus on these and all the many challenges facing the SEC,” Ms. White said.
She did not indicate her stance on uniform fiduciary duty, emphasizing only that the agency must address it.
In its cost-benefit-analysis information request, the SEC made clear that it had not decided on whether to proceed to a rule. It also said that it might “harmonize” broker and adviser regulations in areas such as advertising, supervision and continuing education before — or perhaps in lieu of — creating a uniform-fiduciary-duty regulation.
Fiduciary advocates are pleased with what they heard from Ms. White during the hearing, in which she testified alongside the Obama administration's nominee to be the permanent director of the Consumer Financial Protection Bureau, Richard Cordray.
“We're glad that she mentioned fiduciary duty and that she would make that a priority,” said Daniel Penchina, a principal at The Raben Group and the chief lobbyist for the Financial Planning Association. Mr. Penchina attended the hearing representing the Financial Planning Coalition, which comprises the FPA, the Certified Financial Planner Board of Standards Inc. and the National Association of Personal Financial Advisors.
In an exchange with Sen. Elizabeth Warren, D-Mass., Ms. White acknowledged that it is hard to quantify the benefits of some regulations.
“The SEC should recognize that there are some benefits or costs of underenforcement that have to be evaluated on their own terms,” Ms. White said.
President Barack Obama nominated Ms. White as SEC chairman in January. If approved by the Senate, she would take over for the current chairman, Elisse B. Walter, who took over when her predecessor, Mary Schapiro, resigned in December.
DEFENDED DEFENSE GIG
Ms. White, a former U.S. attorney for the Southern District of New York, seemed to persuade lawmakers that her tenure at Debevoise & Plimpton LLC, where she defended prominent Wall Street firms such as JPMorgan Chase & Co. and Morgan Stanley, wouldn't create conflicts of interest that undermined her ability to run the SEC.
She said that as a defense attorney, she owed her clients the best representation she could provide — an approach that she said she would replicate as SEC chairman.
“If I am confirmed, then the American public will be my client, and I will work as zealously as is possible on behalf of them,” Ms. White said.
The committee is scheduled to vote tomorrow.
“Given what I know now, I would intend to support her, but I'll continue to evaluate her,” Mr. Crapo told reporters after the hearing.
mschoeff@investmentnews.com Twitter: @markschoeff
