HFS Subcommittee Hearing on SEC Division of Investment Management Oversight
House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises
“Oversight of the SEC’s Division of Investment Management”
Friday, October 23, 2015
Key Topics & Takeaways
- Proxy Advisory Firms: Director Grim noted the importance of proxy advisory firms, but said that his division is studying what it means to be an independent third party and is assessing conflicts of interest.
- Regulation of the Asset Management Industry: Rep. Duffy (R-Wis.) noted that while the SEC is the expert regulator on asset managers, the FSOC has designated asset managers as systemically important financial institutions (SIFIs). When asked if the FSOC understands the asset management industry, Grim stated that while he could not comment on the level of FSOC’s understanding of asset managers, he said the members of the FSOC “don’t understand as well” as the SEC.
- Swing Pricing: Rep. Maloney (D-N.Y.) stated that Europe makes swing pricing mandatory and asked if the U.S. will adopt the same practice. Grim stated the Commission’s intent to make fund pricing “more fair” for all investors, but that there are operational challenges with swing pricing. He continued that the SEC asked questions about the topic in their release and look forward to public comment.
- Proposed Conflict of Interest Rule: Rep. Scott (D-Ga.) stressed that the DOL creating the proposed rule is an “invasion of scope of practice and responsibility,” and that the proposed rule has “tremendous unintended consequences.”
- SEC Fiduciary Rule: Rep. Hill (R-Ark.) asked Grim if the SEC has written a draft proposal of its fiduciary rule. Grim explained that the SEC is still developing the process that started after the passing of Dodd-Frank, adding that it is on the front burner and will go to the Commission when complete. Hill stressed that it is “ridiculous it takes this long,” adding that the DOL is preempting the SEC’s work. Grim replied that “it’s an absolutely important topic, but it’s complicated.”
Witnesses
- David Grim, Director, Division of Investment Management, SEC
Opening Statements
In his opening statement, Chairman Scott Garrett (R-N.J.) stated that the Securities and Exchange Commission (SEC) should remain the primary regulator over capital markets and that its independence “should never be compromised.” He noted his encouragement that the SEC is asserting its jurisdiction in the asset management area but remains “concerned” that part of the Commission’s agenda is subject to “inappropriate influence” by prudential regulators.
In her opening statement, Ranking Member Carolyn Maloney (D-N.Y.) stated that the SEC’s Division of Investment Management is “one of the agency’s most important divisions” because it regulates the asset management industry, but that it “has its work cut out for them” when overseeing over 12,000 registered investment advisors. She noted the Financial Stability Oversight Council’s (FSOC) concern with proper liquidity management, as risk funds could be forced into a fire sale that “will send prices plummeting,” harming broader markets.
In his opening statement, Vice Chairman Robert Hurt (R-Va.) stressed that small businesses and startup companies rely on private capital to “get started” and that capital formation is “desperately needed.” He noted H.R.1105, the Small Business Capital Access and Job Preservation Act, that he and Rep. Jim Himes (D-Conn.) introduced in 2013 that would eliminate the burden the Dodd-Frank Act placed on private equity firms, placing them “on a similar playing field as other funds,” as they are not a source of systemic risk.
Witness Testimony
David Grim, Director, Division of Investment Management, SEC
In his testimony, Director Grim testified that the SEC adopted rules for money market funds in July 2014 with amendments intended to reduce runs and enhance the transparency of the funds and disclosure requirements. He continued that the SEC proposed new rules in May 2015 to modernize, enhance and standardize reporting and disclosure information by registered investment companies.. Grim explained that mutual funds and other registered investment companies will be permitted to provide shareholder reports and portfolio holdings online. He noted that the Commission has received “substantial” comments from the public and that they will be considered when creating the final rules.
Grim stated that a new rule was proposed in September 2015 to address developments in the asset management industry that would require open-end funds to adopt and implement liquidity management programs, with amendments that would permit “swing pricing” by mutual funds. He noted the public comment period is open through January 13, 2016. Grim discussed other initiatives the division is working on, to include the use of derivatives by investment companies, transition plans for investment advisors, stress testing for large investment advisers and large investment companies, and third-party compliance reviews.
Questions and Answer
Asset Managers
Garrett asked what the Commission’s involvement is in reviewing asset managers. Grim noted that SEC Chair Mary Jo White is a member of FSOC and that he assists her in providing subject matter expertise, adding that his staff meets with all the industries that fall under the FSOC.
Maloney asked about the next rule set the SEC is expected to release under their asset manager regime. Grim noted that stress testing and transition plans remain an important initiative on the Commission’s priority list, saying progress has been made on both plans, and that he expects the rules to be released in the “near term.”
Rep. Sean Duffy (R-Wis.) noted that while the SEC is the expert regulator on asset managers, the FSOC has designated asset managers as systemically important financial institutions (SIFIs). When asked if the FSOC understands the asset management industry, Grim explained that Chair White is a member of the Council and offers her subject matter expertise on all issues, including asset managers. He added that while he could not comment on the level of FSOC’s understanding of asset managers, he said the members of the FSOC “don’t understand as well” as the SEC.
Rep. Dennis Ross (R-Fla.) asked Grim “what it would take” to constitute an asset manager as a SIFI. Grim noted that it is “too early to say” and that it is important to have criteria in place if the determination will be made.
Rep. Bruce Poliquin (R-Maine) stressed that asset managers should not be penalized for “trying to expand retirement,” and that if they are managing money for investors without assets on a balance sheet, “there’s no risk to the market and therefore shouldn’t be listed as SIFIs.”
Proxy Advisors
When Garrett asked about the results of the proxy season, Grim explained that the SEC held a roundtable on proxy advisory firms and how investment advisors use these firms. He said the SEC is still studying the impacts from the proxy season, though he noted that, anecdotally, proxy advisory firms have a “positive effect.”
When Rep. Bill Huizenga (R-Mich.) asked about proxy advisory firms, Grim explained that his division provided guidance focused on how proxy advisory firms disclose conflicts and how investment advisors use proxy advisory firms. He continued that the guidance provides SEC staff views on what advisors should consider when choosing to employ a proxy advisory firm. Grim noted the importance of proxy advisory firms, but said that his division is studying what it means to be an independent third party and is assessing conflicts of interest.
Sherman noted his concern with using third parties for compliance reviews. Grim stated that Chair White has directed the staff to create a recommendation on the topic.
Rep. Ed Royce (R-Calif.) asked if proxy advisory firms should be held to the same accountability when it comes to corporate reporting and transparency that publicly traded companies are required to, per the SEC. Grim explained that his staff is addressing what can be done to encourage “good disclosures” by proxy advisory firms and how investor advisors can use them.
SwingPricing
Maloney noted that Europe makes swing pricing mandatory and asked if the U.S. will adopt the same practice. Grim stated the Commission’s intent to make fund pricing “more fair” for all investors, but that there are operational challenges with swing pricing. He continued that the SEC asked questions about the topic in their release and look forward to public comment.
Private Equity Funds
Hurt asked if private equity funds present systemic risk. Grim explained that private equity funds have to register with his division under Dodd-Frank, which is a “good thing,” adding that “important” protections are included with registration. He continued that whether they present systemic risk is up to the FSOC to determine, but that there were some concerns resulting from examinations in the “fee area” that raise investor protection concerns.
Rep. Jim Himes (D-Conn.) echoed Hurt’s comments on their proposed bill (H.R.1105), adding that he is “saddened” to see the SEC focused on fees, as a result of issues that emerged regarding their transparency. He asked Grim how concerned his staff is with the absence of transparency in investment vehicles. Grim explained that Dodd-Frank ordered the SEC to develop rules implementing the registration of numerous private fund investments, including private equity advisors.
Money Market Funds
Rep. Stephen Lynch (D-Mass.) asked if there have been any progress reports resulting from the adoption of the money market funds rule. Grim explained that one part of the money market funds rule is the floating net asset value (NAV) provision that applies to a particular money market fund, and that many companies have “changes to line ups” due to the rule. He noted that it is too early to tell what impact this will have because the compliance date is not until October 2016.
Investor Advisors
Neugebauer asked what analysis the investment management division has done on the impact of investment advisors registered with the SEC. Grim noted that the SEC staff has been studying the issue “extensively” with analysis being conducted as part of developing a recommendation to the Commission.
Neugebauer asked Grim about investor advisors who will be subject to two different fiduciary standards based on the products they recommend. Grim explained that investor advisors with Employee Retirement Income Security Act (ERISA) clients are subject to ERISA and SEC standards, but only subject to SEC standards for other clients.
Safe Harbors
Hill stated that securities receive a safe harbor for research and asked why this should not be extended to exchange traded funds (ETFs). Grim noted the SEC’s support of good research for securities, adding that while he is not sure how it would work, he would encourage the research of ETFs, subject to investor protections.
Liquidity Rules
Sherman asked Grim to explain the SEC’s liquidity proposal. Grim noted that in the proposal, there are six “buckets” of liquidity categories that are disclosed and transparent, and suggested creation of a rule to codify the guidance that caps the amount of illiquid assets a fund can hold.
BusinessDevelopment Companies
Rep. Ed Perlmutter (D-Colo.) asked for Grim’s reaction to H.R.1800, the Small Business Credit Availability Act. Grim stated that BDCs touch on the capital formation and investor protection mission of the Commission and that while the bill would add leverage, it could potentially raise investor protection concerns.
DOL’s Proposed Conflict of Interest Rule
Neugebauer asked about the coordination the SEC has had with Department of Labor (DOL) on the proposed fiduciary standard. Grimes explained that SEC staff in his division and others has provided technical expertise regarding the potential impact of certain choices the DOL is making or may make in the proposal.
Rep. David Scott (D-Ga.) asked why the DOL is “getting into [the SEC’s] area,” threatening low income communities and small businesses from receiving financial advice. While Grim noted his awareness of Dodd-Frank placing the duty of creating a uniform fiduciary standard on the SEC in Section 913, he continued that Chair White announced her support for pursuing a uniform fiduciary standard and asked his division to develop a recommendation.
Scott continued that the DOL creating the proposed rule is an “invasion of scope of practice and responsibility,” and that the proposed rule has “tremendous unintended consequences.”
Ross stressed that the proposed fiduciary definition will eliminate small investors from receiving adequate advice and asked to what degree the DOL coordinated with the SEC. Grim noted that the SEC provided its subject matter expertise in conjunction with developing the rule and that staff has spoken on their views of potential impacts the rule could have.
Ross continued that there will be conflict between fair compensation and reasonable compensation, and asked how to find resolution between the two rules. Grim explained that his division is studying the potential impacts for the SEC’s uniform fiduciary rule and that it is “conscious” of the compensation issues.
Rep. John Carney (D-Del.) asked about the study Grim is conducting on the DOL’s proposed rule. Grim explained that he is studying impact questions so the division can create a recommendation in the “best way possible” but that he is unaware of when the recommendation will be finalized.
Carney continued by asking Grim his opinion on the best interest contract (BIC), to which Grim stated that the division’s focus is the potential impact of choices the DOL is making in its proposal.
Carney raised concern that small balance accounts will be “orphaned” due to compensation allowance changes. Grim echoed the concern, adding that the issue is “very important to us” and that his staff is looking at the issue.
Huizenga asked Grim for specifics on the DOL’s outreach to the SEC on its proposed fiduciary standard. Grim noted that while the DOL did ask the SEC for help, he is unaware of to whom the information was sent.
Rep. David Schweikert (R-Ariz.) asked if there is an accessibility discussion with the DOL on other platforms that can provide information to the public so they can enter the investor class. Grim explained that investor access to advice is a “cornerstone” of what the SEC is trying to accomplish through its work on a uniform fiduciary duty, and that the SEC is sharing this expertise with the DOL.
Hill asked Grim if the SEC has written a draft proposal of its fiduciary rule. Grim explained that the SEC is still developing the process that started after the passing of Dodd-Frank, adding that it is on the front burner and will go to the Commission when complete.
Hill stressed that it is “ridiculous it takes this long,” adding that the DOL is preempting the SEC’s work. Grim replied that “it’s an absolutely important topic, but it’s complicated.”
Rep. Randy Hultgren (R-Ill.) noted his disbelief that the DOL should put in place “flawed rules,” adding that the SEC would do a “better job.”
Rep. Steve Stivers (R-Ohio) asked if the SEC has had conversations with the DOL on “holding off” rulemaking until the SEC completes its Section 913 rulemaking, to which Grim said no.
Stivers stressed that investors will have fewer choices due to the DOL’s rule and suggested that Grim study the impact the U.K.’s Retail Distribution Review (RDR) had on investors.
Sherman stressed the need for the SEC to tell the DOL that the Commission has expertise in the area and “work to harmonize these rules.”
Puerto Rico
Rep. Nydia Velazquez (D-N.Y.) discussed H.R.3610, the Puerto Rico Investor Protection Act of 2015, which she sponsored, which terminates exempting companies in American territories from the Investment Company Act. She stressed that American citizens in Puerto Rico are at a disadvantage due to not falling under the Investor Protection Act, but that her legislation would “close the loophole.”
For more information on this event, please click here.
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House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises
“Oversight of the SEC’s Division of Investment Management”
Friday, October 23, 2015
Key Topics & Takeaways
- Proxy Advisory Firms: Director Grim noted the importance of proxy advisory firms, but said that his division is studying what it means to be an independent third party and is assessing conflicts of interest.
- Regulation of the Asset Management Industry: Rep. Duffy (R-Wis.) noted that while the SEC is the expert regulator on asset managers, the FSOC has designated asset managers as systemically important financial institutions (SIFIs). When asked if the FSOC understands the asset management industry, Grim stated that while he could not comment on the level of FSOC’s understanding of asset managers, he said the members of the FSOC “don’t understand as well” as the SEC.
- Swing Pricing: Rep. Maloney (D-N.Y.) stated that Europe makes swing pricing mandatory and asked if the U.S. will adopt the same practice. Grim stated the Commission’s intent to make fund pricing “more fair” for all investors, but that there are operational challenges with swing pricing. He continued that the SEC asked questions about the topic in their release and look forward to public comment.
- Proposed Conflict of Interest Rule: Rep. Scott (D-Ga.) stressed that the DOL creating the proposed rule is an “invasion of scope of practice and responsibility,” and that the proposed rule has “tremendous unintended consequences.”
- SEC Fiduciary Rule: Rep. Hill (R-Ark.) asked Grim if the SEC has written a draft proposal of its fiduciary rule. Grim explained that the SEC is still developing the process that started after the passing of Dodd-Frank, adding that it is on the front burner and will go to the Commission when complete. Hill stressed that it is “ridiculous it takes this long,” adding that the DOL is preempting the SEC’s work. Grim replied that “it’s an absolutely important topic, but it’s complicated.”
Witnesses
- David Grim, Director, Division of Investment Management, SEC
Opening Statements
In his opening statement, Chairman Scott Garrett (R-N.J.) stated that the Securities and Exchange Commission (SEC) should remain the primary regulator over capital markets and that its independence “should never be compromised.” He noted his encouragement that the SEC is asserting its jurisdiction in the asset management area but remains “concerned” that part of the Commission’s agenda is subject to “inappropriate influence” by prudential regulators.
In her opening statement, Ranking Member Carolyn Maloney (D-N.Y.) stated that the SEC’s Division of Investment Management is “one of the agency’s most important divisions” because it regulates the asset management industry, but that it “has its work cut out for them” when overseeing over 12,000 registered investment advisors. She noted the Financial Stability Oversight Council’s (FSOC) concern with proper liquidity management, as risk funds could be forced into a fire sale that “will send prices plummeting,” harming broader markets.
In his opening statement, Vice Chairman Robert Hurt (R-Va.) stressed that small businesses and startup companies rely on private capital to “get started” and that capital formation is “desperately needed.” He noted H.R.1105, the Small Business Capital Access and Job Preservation Act, that he and Rep. Jim Himes (D-Conn.) introduced in 2013 that would eliminate the burden the Dodd-Frank Act placed on private equity firms, placing them “on a similar playing field as other funds,” as they are not a source of systemic risk.
Witness Testimony
David Grim, Director, Division of Investment Management, SEC
In his testimony, Director Grim testified that the SEC adopted rules for money market funds in July 2014 with amendments intended to reduce runs and enhance the transparency of the funds and disclosure requirements. He continued that the SEC proposed new rules in May 2015 to modernize, enhance and standardize reporting and disclosure information by registered investment companies.. Grim explained that mutual funds and other registered investment companies will be permitted to provide shareholder reports and portfolio holdings online. He noted that the Commission has received “substantial” comments from the public and that they will be considered when creating the final rules.
Grim stated that a new rule was proposed in September 2015 to address developments in the asset management industry that would require open-end funds to adopt and implement liquidity management programs, with amendments that would permit “swing pricing” by mutual funds. He noted the public comment period is open through January 13, 2016. Grim discussed other initiatives the division is working on, to include the use of derivatives by investment companies, transition plans for investment advisors, stress testing for large investment advisers and large investment companies, and third-party compliance reviews.
Questions and Answer
Asset Managers
Garrett asked what the Commission’s involvement is in reviewing asset managers. Grim noted that SEC Chair Mary Jo White is a member of FSOC and that he assists her in providing subject matter expertise, adding that his staff meets with all the industries that fall under the FSOC.
Maloney asked about the next rule set the SEC is expected to release under their asset manager regime. Grim noted that stress testing and transition plans remain an important initiative on the Commission’s priority list, saying progress has been made on both plans, and that he expects the rules to be released in the “near term.”
Rep. Sean Duffy (R-Wis.) noted that while the SEC is the expert regulator on asset managers, the FSOC has designated asset managers as systemically important financial institutions (SIFIs). When asked if the FSOC understands the asset management industry, Grim explained that Chair White is a member of the Council and offers her subject matter expertise on all issues, including asset managers. He added that while he could not comment on the level of FSOC’s understanding of asset managers, he said the members of the FSOC “don’t understand as well” as the SEC.
Rep. Dennis Ross (R-Fla.) asked Grim “what it would take” to constitute an asset manager as a SIFI. Grim noted that it is “too early to say” and that it is important to have criteria in place if the determination will be made.
Rep. Bruce Poliquin (R-Maine) stressed that asset managers should not be penalized for “trying to expand retirement,” and that if they are managing money for investors without assets on a balance sheet, “there’s no risk to the market and therefore shouldn’t be listed as SIFIs.”
Proxy Advisors
When Garrett asked about the results of the proxy season, Grim explained that the SEC held a roundtable on proxy advisory firms and how investment advisors use these firms. He said the SEC is still studying the impacts from the proxy season, though he noted that, anecdotally, proxy advisory firms have a “positive effect.”
When Rep. Bill Huizenga (R-Mich.) asked about proxy advisory firms, Grim explained that his division provided guidance focused on how proxy advisory firms disclose conflicts and how investment advisors use proxy advisory firms. He continued that the guidance provides SEC staff views on what advisors should consider when choosing to employ a proxy advisory firm. Grim noted the importance of proxy advisory firms, but said that his division is studying what it means to be an independent third party and is assessing conflicts of interest.
Sherman noted his concern with using third parties for compliance reviews. Grim stated that Chair White has directed the staff to create a recommendation on the topic.
Rep. Ed Royce (R-Calif.) asked if proxy advisory firms should be held to the same accountability when it comes to corporate reporting and transparency that publicly traded companies are required to, per the SEC. Grim explained that his staff is addressing what can be done to encourage “good disclosures” by proxy advisory firms and how investor advisors can use them.
SwingPricing
Maloney noted that Europe makes swing pricing mandatory and asked if the U.S. will adopt the same practice. Grim stated the Commission’s intent to make fund pricing “more fair” for all investors, but that there are operational challenges with swing pricing. He continued that the SEC asked questions about the topic in their release and look forward to public comment.
Private Equity Funds
Hurt asked if private equity funds present systemic risk. Grim explained that private equity funds have to register with his division under Dodd-Frank, which is a “good thing,” adding that “important” protections are included with registration. He continued that whether they present systemic risk is up to the FSOC to determine, but that there were some concerns resulting from examinations in the “fee area” that raise investor protection concerns.
Rep. Jim Himes (D-Conn.) echoed Hurt’s comments on their proposed bill (H.R.1105), adding that he is “saddened” to see the SEC focused on fees, as a result of issues that emerged regarding their transparency. He asked Grim how concerned his staff is with the absence of transparency in investment vehicles. Grim explained that Dodd-Frank ordered the SEC to develop rules implementing the registration of numerous private fund investments, including private equity advisors.
Money Market Funds
Rep. Stephen Lynch (D-Mass.) asked if there have been any progress reports resulting from the adoption of the money market funds rule. Grim explained that one part of the money market funds rule is the floating net asset value (NAV) provision that applies to a particular money market fund, and that many companies have “changes to line ups” due to the rule. He noted that it is too early to tell what impact this will have because the compliance date is not until October 2016.
Investor Advisors
Neugebauer asked what analysis the investment management division has done on the impact of investment advisors registered with the SEC. Grim noted that the SEC staff has been studying the issue “extensively” with analysis being conducted as part of developing a recommendation to the Commission.
Neugebauer asked Grim about investor advisors who will be subject to two different fiduciary standards based on the products they recommend. Grim explained that investor advisors with Employee Retirement Income Security Act (ERISA) clients are subject to ERISA and SEC standards, but only subject to SEC standards for other clients.
Safe Harbors
Hill stated that securities receive a safe harbor for research and asked why this should not be extended to exchange traded funds (ETFs). Grim noted the SEC’s support of good research for securities, adding that while he is not sure how it would work, he would encourage the research of ETFs, subject to investor protections.
Liquidity Rules
Sherman asked Grim to explain the SEC’s liquidity proposal. Grim noted that in the proposal, there are six “buckets” of liquidity categories that are disclosed and transparent, and suggested creation of a rule to codify the guidance that caps the amount of illiquid assets a fund can hold.
BusinessDevelopment Companies
Rep. Ed Perlmutter (D-Colo.) asked for Grim’s reaction to H.R.1800, the Small Business Credit Availability Act. Grim stated that BDCs touch on the capital formation and investor protection mission of the Commission and that while the bill would add leverage, it could potentially raise investor protection concerns.
DOL’s Proposed Conflict of Interest Rule
Neugebauer asked about the coordination the SEC has had with Department of Labor (DOL) on the proposed fiduciary standard. Grimes explained that SEC staff in his division and others has provided technical expertise regarding the potential impact of certain choices the DOL is making or may make in the proposal.
Rep. David Scott (D-Ga.) asked why the DOL is “getting into [the SEC’s] area,” threatening low income communities and small businesses from receiving financial advice. While Grim noted his awareness of Dodd-Frank placing the duty of creating a uniform fiduciary standard on the SEC in Section 913, he continued that Chair White announced her support for pursuing a uniform fiduciary standard and asked his division to develop a recommendation.
Scott continued that the DOL creating the proposed rule is an “invasion of scope of practice and responsibility,” and that the proposed rule has “tremendous unintended consequences.”
Ross stressed that the proposed fiduciary definition will eliminate small investors from receiving adequate advice and asked to what degree the DOL coordinated with the SEC. Grim noted that the SEC provided its subject matter expertise in conjunction with developing the rule and that staff has spoken on their views of potential impacts the rule could have.
Ross continued that there will be conflict between fair compensation and reasonable compensation, and asked how to find resolution between the two rules. Grim explained that his division is studying the potential impacts for the SEC’s uniform fiduciary rule and that it is “conscious” of the compensation issues.
Rep. John Carney (D-Del.) asked about the study Grim is conducting on the DOL’s proposed rule. Grim explained that he is studying impact questions so the division can create a recommendation in the “best way possible” but that he is unaware of when the recommendation will be finalized.
Carney continued by asking Grim his opinion on the best interest contract (BIC), to which Grim stated that the division’s focus is the potential impact of choices the DOL is making in its proposal.
Carney raised concern that small balance accounts will be “orphaned” due to compensation allowance changes. Grim echoed the concern, adding that the issue is “very important to us” and that his staff is looking at the issue.
Huizenga asked Grim for specifics on the DOL’s outreach to the SEC on its proposed fiduciary standard. Grim noted that while the DOL did ask the SEC for help, he is unaware of to whom the information was sent.
Rep. David Schweikert (R-Ariz.) asked if there is an accessibility discussion with the DOL on other platforms that can provide information to the public so they can enter the investor class. Grim explained that investor access to advice is a “cornerstone” of what the SEC is trying to accomplish through its work on a uniform fiduciary duty, and that the SEC is sharing this expertise with the DOL.
Hill asked Grim if the SEC has written a draft proposal of its fiduciary rule. Grim explained that the SEC is still developing the process that started after the passing of Dodd-Frank, adding that it is on the front burner and will go to the Commission when complete.
Hill stressed that it is “ridiculous it takes this long,” adding that the DOL is preempting the SEC’s work. Grim replied that “it’s an absolutely important topic, but it’s complicated.”
Rep. Randy Hultgren (R-Ill.) noted his disbelief that the DOL should put in place “flawed rules,” adding that the SEC would do a “better job.”
Rep. Steve Stivers (R-Ohio) asked if the SEC has had conversations with the DOL on “holding off” rulemaking until the SEC completes its Section 913 rulemaking, to which Grim said no.
Stivers stressed that investors will have fewer choices due to the DOL’s rule and suggested that Grim study the impact the U.K.’s Retail Distribution Review (RDR) had on investors.
Sherman stressed the need for the SEC to tell the DOL that the Commission has expertise in the area and “work to harmonize these rules.”
Puerto Rico
Rep. Nydia Velazquez (D-N.Y.) discussed H.R.3610, the Puerto Rico Investor Protection Act of 2015, which she sponsored, which terminates exempting companies in American territories from the Investment Company Act. She stressed that American citizens in Puerto Rico are at a disadvantage due to not falling under the Investor Protection Act, but that her legislation would “close the loophole.”
For more information on this event, please click here.