July 21, 2017

Via Webform to: https://www.sec.gov/cgi-bin/ruling-comments

U.S. Securities and Exchange Commission
100 F Street, NE
Washington DC 20549-1090
Attn: Mr. Brent J. Fields, Secretary

Re: Standards of Conduct for Investment Advisers and Broker-Dealers

Dear Mr. Fields:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates SEC Chairman Clayton’s recent request for public comment on the standards of conduct for investment advisers and broker-dealers (the “Request”).2 We welcome the SEC’s renewed focus on this important issue. We wish to remain constructive participants in the process and hope that you find our members’ collective feedback helpful.

The Request states that the SEC is continuing to evaluate a range of potential regulatory options including:

(1) maintaining the existing regulatory structure,
(2) requiring enhanced disclosures to mitigate investor confusion,
(3) developing a best interest standard for broker-dealers (“BDs”), and
(4) developing a uniform standard of conduct for BDs and investment advisers (“IAs”) when providing personalized investment advice to retail investors.

The Request further states that the recent applicability of the Department of Labor (“DOL”) Fiduciary Rule (the “DOL Rule”), along with other marketplace changes, constitute significant developments since the SEC last solicited comments from the public in 2013. We note that the President has directed the DOL to study whether the DOL Rule has limited investor choice, encouraged litigation, and had a harmful effect on the industry, and if it finds that any of these results will ensue from the DOL Rule, the DOL must revise it accordingly (or rescind it altogether). Secretary Acosta has urged the Chairman to collaborate on consistent regulation, and the Chairman has pledged to do so. Thus, the Request expresses the mutual interest of the SEC and the DOL in closely coordinating their regulatory activities on this issue.

Consequently, SIFMA’s comment will focus on the feasibility of the four regulatory options described above 3 in light of the recent applicability of the DOL Rule, and the recently expressed interest in SEC/DOL regulatory coordination.4 Our comment will also emphasize our strong support for SEC/DOL coordination and the unique opportunity it presents to craft a single, consistent long-term solution for all retail investors. Meaningful and productive coordination, however, will take time. Thus, we are urging – and we welcome the SEC joining us in urging – the DOL to extend the January 1, 2018 applicability date of the provisions in the DOL’s Best Interest Contract Exemption and Principal Transactions Exemption that are not now in effect.5

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1 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.

2 Public Statement by Chairman Jay Clayton, Public Comments from Retail Investors and Other Interested Parties on Standards of Conduct for Investment Advisers and Broker-Dealers (June 1, 2017), available at https://www.sec.gov/news/public-statement/statement-chairman-clayton-2017-05-31.

3 Options (1) and (2) are addressed in Appendices 1 and 2 hereto, respectively.

4 The Request also seeks any relevant data that may inform the standard of conduct debate. SIFMA continues to review whether we may be able to collect and produce such data and if so, we would do so in a separate submission at a later date.

5 See SIFMA comment letter to DOL, Reference: RIN 1210-AB82 (July 13, 2017) (expressing the critical importance of delaying the January 1, 2018 date by a minimum of 24 months after completion of the review and publication of final rules).