SEC Official Takes Heat Over Fiduciary Rule Inaction

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By Rob Tricchinelli

Oct. 23 — A top SEC official took heat from House lawmakers over the agency's lack of progress toward crafting a uniform fiduciary standard for broker-dealers.

Securities and Exchange Commission officials have said the agency is working on a rule using the authority given to it by the Dodd-Frank Act, on the heels of a similar Labor Department proposal (RIN 1201-AB32) that would require broker-dealers to conform to a fiduciary standard, instead of the suitability standard they now face.

During a hearing of the House Financial Services Capital Markets Subcommittee on Oct. 23, David Grim, director of the SEC's Division of Investment Management, offered no details on when a rule might be proposed, which flummoxed lawmakers on the panel from both parties.

Grim's written testimony didn't fully commit to an agency proposal, either. “Whether a rule is ultimately proposed and adopted depends on further analysis and action by the full Commission,” it said.


Rep. French Hill (R-Ark.), a freshman congressman and former broker, asked whether a proposal was already written and when it might go to the commission.

Grim said the division staff was “in the process” of writing the rule and it would be presented to the commission “as soon as it’s ready.”

“This is ridiculous that it takes this long,” Hill replied.

Critics of the Labor Department's proposal have said the SEC is better equipped to impose a fiduciary standard on broker-dealers and that competing proposals by different regulators would lead to industry confusion and increased consumer cost, all themes that were broached at the Grim hearing.

“Nobody knows more about investment management than the Securities and Exchange Commission,” Rep. David Scott (D-Ga.) said. “Why is the Labor Department dabbling in this issue and bringing about such consternation and confusion?”

An SEC rule could reach more broadly than the Labor Department proposal, which would apply primarily to retirement accounts.

“It is absolutely absurd to think that we have one set of rules applying to me because I have my money in an IRA and no rules, perhaps, or another set of rules applying to my mother who inherits some money from my father,” Rep. Brad Sherman (D-Calif.) said.

In September, the full committee approved a bill by Rep. Ann Wagner (R-Mo.), with some Democratic support, that would halt the DOL's rule until the SEC makes its own. The House Rules Committee is slated to consider the bill Oct. 27, paving the way for the full House to vote on it and pass it with only a simple majority.


Sherman and other lawmakers asked Grim to weigh in on the Labor Department's rule.

He was asked whether the SEC should preempt the DOL rule or DOL should suspend its rulemaking, as well as whether the SEC was coordinating with DOL on rule release dates, but he repeatedly declined to answer or give specifics.

“These aren’t hard questions,” Rep. Steve Stivers (R-Ohio) said. “I’m sorry you don’t know the answers to them.”

Grim echoed comments earlier in the year by White, who said that the SEC provided technical assistance to DOL before it proposed the rule.

“You’ve got to work to harmonize these rules,” Sherman said.

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at


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