Slow Going for Regulatory Reforms at the SEC
Remember the proposed curbs on short-selling? It’s just one of a number of regulations put forth by SEC chair Mary Schapiro but not yet adopted, according to the Washington Post. Wall Street has fought the rule since its introduction, and “the agency's staff is having difficulty tailoring a rule that would discourage short selling designed to manipulate stock prices while not shutting out legitimate forms of the practice,” the paper reports. Sources say the SEC is also concerned about potential legal challenges from businesses to overturn the rule. But there’s more at stake than just short-selling, according to the Post: Whether Schapiro can achieve her reforms says a great deal about whether she can shake up the SEC and rehab its image as a regulator. Both the Bush and Obama administrations considered “stripping it of key powers,” the paper says, but Schapiro’s vision for the agency helped save its authority. Former SEC senior official Lynn Turner says it's too soon to grade Schapiro: "It takes a while to get regulations done and it's just too early to tell how effective she'll be."
One provision that might not make it into the final financial reform bill, according to the New York Times: A requirement that stock and insurance brokers act in their clients’ best interests. While investment advisors already act based on what’s known as fiduciary duty, other brokers are only required to guide clients toward “suitable” investments, which might mean profit for the broker, rather than the client. In recent years, it’s become harder for customers to distinguish among the types of brokers. Consumer advocates worry lax rules allow for “hat-switching,” in which brokers act as fiduciaries while giving advice but then default to the suitability standard when picking stocks. The paper reports the insurance industry is opposed to the measure. According to Ole Miss associate law professor and SEC advisor Mercer Bullard, that’s because such a rule would require brokers to disclose their compensation when selling a variable annuity, and that “would make clear the excessive incentives they have to mis-sell the variable annuity.
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Source: thebigmoney.com
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