BISA Magazine - Quarter 3, 2017 - 25

and market trends," must be viewed in
context. The Commission first took up
this issue almost a decade ago when it
commissioned the RAND Corporation
to conduct a study of investor perspectives.4 The RAND Report found that
trends in the financial services markets
since the early 1990s had blurred
the boundaries between investment
advisers and broker-dealers, and that
firms were constantly evolving and
bundling diverse products and services in response to market demands
and the regulatory environment. The
RAND Report also found that retail
investors were confused about the differences between investment advisers
and broker-dealers, including the legal
duties owed to investors with respect to
the services and functions those professionals performed. The SEC did not act
on these findings.
Fast-forward to 2013. In response to
Dodd-Frank's directive, the SEC staff
issued a study5 analyzing the differences in legal and regulatory standards
in the protection of retail customers
relating to the standards of care for
broker-dealers and investment advisers
for providing personalized investment
advice about securities to retail customers.6 The study concluded with a staff
recommendation that the SEC initiate
rulemaking to propose a uniform fidu-

... retail investors were confused
about the differences between
investment advisers and brokerdealers, including the legal duties
owned to investors with respect to
the services and fucntions those
professionals performed."
ciary standard to both broker-dealers
and investment advisers that would
apply when personalized investment
advice about securities is provided to
retail customers. Again, the SEC did not
act on its staff recommendations.

The Current Review
Initiative
In kicking off this latest round of review, Chairman Clayton noted that the
DOL Rule might have significant effects
on retail investors and entities regulated by the SEC. He observed that many

of these matters fall within the SEC's
mission of protecting investors, maintaining sound markets and facilitating
capital formation. Citing "significant
developments in the marketplace" since
2013, Mr. Clayton expressed the belief
that an updated assessment of the current regulatory framework, the current
state of the market for retail investment
advice and overall market trends, is
important to the Commission's ability
to evaluate the "range of [available]
potential regulatory actions."
The scope of review outlined in Chairman Clayton's June 1 statement is vast.
The statement welcomes comment on

1. See Statement of Chairman Jay Clayton, Public Comments from Retail Investors and Other Interested Parties on Standards of Conduct for Investment Advisers and BrokerDealers (June 1, 2017), available at www.sec.gov/news/public-statement/statement-chairman-clayton-2017-05-31.
2. Citing the SEC's "critical expertise in this area," Secretary of Labor Acosta recently expressed hope that the Commission will be a full participant as DOL continues evaluation
of its Fiduciary Rule. See Alexander Acosta, Deregulators Must Follow the Law, So Regulators Will Too, The Wall Street Journal (May 22, 2017), available at www.wsj.com/
articles/deregulators-must-follow-the-law-so-regulators-will-too-1495494029.
3. Section 913 of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) empowered, but did not require, the SEC to adopt
a uniform standard of care applicable to both advisers and broker-dealers when providing retail advice. The statute directed the SEC to conduct a study to evaluate the effectiveness of existing legal or regulatory standards of care for providing personalized investment advice and recommendations about securities to retail customers; and whether
there are legal or regulatory gaps, shortcomings or overlaps in legal or regulatory standards that should be addressed by rule or statute.
4. See RAND Corporation, Investor and Industry Perspectives on Investment Advisers and Broker-Dealers (January 3, 2008), available at www.sec.gov/news/
press/2008/2008-1_randiabdreport.pdf (version finalized Mar. 19, 2008).
5. See Study on Investment Advisers and Broker-Dealers as Required by Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (January 2011), available at www.sec.gov/news/studies/2011/913studyfinal.pdf.
6. See Public Comments from Retail Investors and Other Interested Parties on Standards of Conduct for Investment Advisers and Broker-Dealers, supra note 2.

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BISA Magazine

http://www.sec.gov/news/public-statement/statement-chairman-clayton-2017-05-31 http://www.wsj.com/articles/deregulators-must-follow-the-law-so-regulators-will-too-1495494029 http://www.wsj.com/articles/deregulators-must-follow-the-law-so-regulators-will-too-1495494029 http://www.sec.gov/news/press/2008/2008-1_randiabdreport.pdf http://www.sec.gov/news/press/2008/2008-1_randiabdreport.pdf http://www.sec.gov/news/studies/2011/913studyfinal.pdf

Table of Contents for the Digital Edition of BISA Magazine - Quarter 3, 2017