Photo: Shutterstock / ALM-Chris NichollsAccording to Daniel Suvor, Assistant to Vice President-elect Kamala Harris, during his time as California Attorney General, Daniel Suvor, Assistant to Vice President-elect Kamala Harris, will make the legislation “significantly increase” under the Biden administration. “I don’t think that comes out extremely.”
Among the names running to replace the chairman of the Securities and Exchange Commission, Jay Clayton, under the elected chairman of Joe Biden are Gary Gensler, former chairman of the Commodity Futures Trading Commission, and Preet Bharara, northern American from the southern district of New York, under former President Barack Obama. .
Expect the SEC’s presidency of the Biden administration to “be more in line” with former SEC President Mary Jo White, “with many expecting him to be considered another former U.S. lawyer,” such as Bharara , for the post, said Nicolas Morgan, partner at defense firm Paul Hastings.
White’s “broken windows” philosophy underscored enforcement action even for minor transgressions, reflecting his career as a criminal prosecutor, ”Morgan said.
By contrast, “Clayton’s emphasis on increasing market access for Main Street investors reflected his background and priorities,” Morgan added.
The agency will also replace departing heads of division. Brett Redfearn, director of the SEC’s Commerce and Markets Division, will step down at the end of the year and Stephanie Avakian, head of control at the SEC. Dalia Blass, head of the agency’s investment management division, plans to leave the agency in January.
Clayton’s exit at the end of the year “leaves the SEC without a helm,” said James Angel, an associate professor of finance at Georgetown University’s McDonough School of Business. Clayton who quit smoking now “indicates to the incoming administration that they need to fill the job immediately.”
An interim SEC chairman – likely Republican Commissioner Hester Peirce – will take the helm until the incoming Biden administration appoints Clayton’s successor.
During his nearly three-and-a-half years as chairman, Clayton advanced more than 65 final rules to date on the commission’s policy divisions and offices, including the Customer Relationship Summary form and the CRS form. Under Clayton’s control, the agency also ended its long-awaited advertising and marketing rules for advisers on Tuesday, which allow for testimonials.
Clayton said Oct. 19 that he was “cautiously satisfied” with Reg BI, but noted that three months after its application date he noticed some worrying trends.
As expected, the securities regulator’s examination division plans to increase monitoring of intermediaries ’compliance with Reg BI from January, including recommendations on changes.
Under Biden’s administration, “I don’t expect the SEC to set aside BI and start from scratch,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “It simply came to our notice then [the SEC under Biden] move forward relatively quickly to clarify the meaning of best interest and do so in a way that clearly improves suitability and clarify how it determines whether policies and procedures mitigate conflicts of interest. “
The SEC will need to work with the Financial Industry Regulatory Authority and states, Roper added, “to assess what is happening and what is not happening when companies implement Reg BI. Once they have had time to do so, I think that there will be additional areas where action is needed to perfect the standard, but these changes will have to be based on evidence. “
According to Morgan, advisors and investment brokers can expect Reg BI to “lean back toward imposing a fiduciary standard on brokers, either through new legislation, enforcement actions that drive the current huge norm Irrigation Irrigation, staff guidance or all three “.
Fiduciary rule of labor
The Department of Labor ended its fiduciary exemption from prohibited transactions in mid-December to align with Reg BI, a rule that industry officials say will have a significant impact on IRA transfer recommendations and advice.
However, industry officials anticipate that the Biden administration will withdraw the rule and tighten it.
After a quick review of the 295-page rule, the IRA and tax specialist Ed Slott, of Ed Slott & Co., said the PTE “generally follows” the BI Reg with regard to the transfer advice.
“The same standard would apply, which means advisors will have to demonstrate that they have gone through a process when it comes to advising on rollover options and being able to document that analysis,” Slott explained.
“They can charge them for this advice, but they need to show that they have reviewed the pros and cons of each potential option and made recommendations that interest the client,” he said.
Advisors, Slott continued, “need to be better educated in all facets of rollover options.”
The final Labor rule “closely follows the proposal, which we strongly opposed because it was too weak to protect retirement savings from conflicting investment boards. Here the same thing happens,” Roper said. “Setting this rule and the BI Ir will be the first priorities of the Biden administration.”
Fred Reish, a partner at Faegre Drinker in Los Angeles, said the Labor PTE, called the Improving Investment Advice for Workers & Pensioners, will probably not be effective before Biden takes office.
The Biden administration “will withdraw and study the new rule to determine if it is consistent with the administration’s positions,” Reish said, adding that the Biden Department of Labor will “review the rule to make it more demanding “.
New name for the SEC exam division
The SEC announced in mid-December that its Office of Inspections and Compliance Examinations will be renamed the Examinations Division.
In its 25 years since its inception, OCIE has grown, both in number (more than 1,000) and in percentages (23%) of SEC employees, to representing the second largest office or division of the SEC. , the second in size only in the Application Division. said the agency.
The unit is primarily responsible for conducting risk-based examinations of entities registered with the SEC, which include, but are not limited to: more than 13,800 investment advisors; approximately 10,000 investment funds and ETFs; more than 3,600 runners; and FINRA.
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