Tomorrow marks the law’s two-year anniversary, but its full impact is yet to be seen.
Two years after President Obama signed the massive Dodd-Frank financial reform bill, the law remains in the implementation phase and the jury is still out on its long-term effects.
So much is unknown because federal agencies have yet to promulgate many of the rules that the law either requires or designates for further study. That’s why, so far at least, the regulatory burden of Dodd-Frank has not greatly affected NAIFA members or their clients.
Of course, uncertainty over Dodd-Frank’s ultimate regulatory impact remains a great source of concern for NAIFA and financial professionals.
The SEC Fiduciary Rule
An expected rule that would require registered reps of broker-dealers to be fiduciaries, currently being considered by the Securities and Exchange Commission, could have a profound negative impact on NAIFA members and middle-market investors if it is not written and implemented properly.
Fortunately, the SEC has taken a deliberative approach to the fiduciary rulemaking process, apparently to ensure it will not negatively impact middle market investors. The SEC recognizes that it is more important to get the rule right, to ensure middle market investors are not harmed and do not end up with diminished access to financial services and advice, than to publish a rule quickly. As the Commission continues to gather information and works on a cost-benefit analysis of the rule, NAIFA will assist in any way we can.
An SRO for Investment Advisers
Secondly, NAIFA supports the legislative effort that has grown from Dodd-Frank to close the regulatory gap between investment advisers and registered reps. To best protect consumers and ensure the reputation of the entire financial services industry, it is important that investment advisers undergo regular regulatory examinations, which to this point has often not been the case. Legislation proposed by Rep. Spencer Bachus (R-Ala.) to authorize a self-regulatory organization for investment advisers would go a long way toward achieving this goal without creating extraordinary costs for smaller advisers.
The SEC's Municipal Advisor's Rule
Finally, NAIFA is concerned that the SEC’s proposed rule requiring the registration of municipal advisors goes well beyond the intent of Dodd-Frank. NAIFA is working with SEC staff and members of Congress to get the Commission to scale back the scope of the proposed rule to include only those persons Dodd-Frank intended to capture – who, based on the plain reading of Dodd-Frank, are typically not NAIFA members. And yet, many members may have to register as municipal advisors even though they are not engaged in advising municipalities about the proceeds of their investments.
So, two-years on, the full impact of Dodd-Frank is still unknown. In many cases, this is because regulators are prudently taking their time to ensure that Dodd-Frank-spawned rules do not do more harm than good. NAIFA continues to work with regulators and Congress to minimize any unintended consequences of the law and to ensure that provisions going into effect serve legitimate consumer-protection purposes.
- “Skepticism about Dodd-Frank two years on,” Wall Street Journal’s “MarketWatch” blog
- "Dodd-Frank turns two this week. Look how it's grown!," The Washington Post
- "Two Years After Dodd-Frank, Has Wall Street Changed?" U.S. News & World Report