A uniform fiduciary rule by the Securities and Exchange Commission will not be released before the end of the Obama administration, but the agency will watch the unfolding of the Department of Labor's fiduciary rule to see if a conflict develops, SEC Chairwoman Mary Jo White told Senate lawmakers.

During the hearing held by the Senate Banking Committee on oversight of the SEC, White also said that the House Appropriations Committee's recent SEC budget approval, which was more than $200 million less than Obama requested for FY2017, will imperil the progress the agency has made and its ability to fulfill its mission.

When asked by Sen. Jon Tester (D-Mont.) if a fiduciary rule would get done before the end of the Obama administration, White responded, “I'm committed to moving it [a fiduciary rule] as fast and as well as I can, but I can't give you that commitment; it's a longer route than that.”

Sen. Elizabeth Warren (D-Mass.) also took White to task over the SEC's disclosure effectiveness initiative, which Warren said has moved the agency in the opposite direction of protecting investors.

“Instead of moving forward on issues intended to help investors, you've actually headed in the opposite direction. Since your first year in office, you've dedicated significant time and resources to a project you invented and called the 'disclosure effectiveness initiative.'”

“Your big idea is that companies may be disclosing too much information, causing investors to suffer from something you call information overload,” Warren continued. “I'm all for eliminating redundant disclosures, but I have not heard of the concept of information overload in the context of investing in stocks. I've never heard of the idea that investors want less information than they're getting.”

The purpose of disclosure effectiveness was a response to a congressional mandate, White responded, under the JOBS Act.

“For decades at the SEC, we've been undergoing disclosure effectiveness review,” White said.

“What evidence do you have of investor overload?” Warren asked.

“The SEC review is meant to make disclosure more meaningful to investors. We've also gotten comments about not objecting to removing things that are repetitive,” White shot back.

Tester then probed White on whether the SEC would enforce the DOL's fiduciary rule.

“We do not enforce the DOL rule,” White responded. “[The] DOL will enforce the rule for advisers and brokers.”

Tester noted that oversight of advisers and brokers has been the SEC's turf and asked, “How is this [DOL oversight] going to work?”

White responded that the SEC and DOL are independent agencies [with] independent rules.

“We've had rules before that overlap. We will watch this [DOL rule] and if issues arise we will coordinate [with DOL] if a conflict develops,” White said.

The SEC's recently released regulatory agenda pegged April 2017 as the date when the agency would issue a fiduciary rule proposal. White noted that while she's committed to getting a fiduciary rulemaking done, “I've made clear how long a road that [rulemaking process] is under Section 913 [of Dodd-Frank]. And I'm one vote.”

White also noted that despite the fact that the SEC has been functioning with three commissioners, instead of the full five, for the last six months, it remains very focused on getting the work done.

While the Senate Banking Committee approved by voice vote on May 20 the two new SEC commissioner nominees, Lisa Fairfax and Hester Peirce, the full Senate has yet to confirm them.

The jury seems to be out as to when – or if – the Senate will take up their nominations, said David Tittsworth, counsel with Ropes & Gray and former head of the Investment Adviser Association. Grave concerns have been expressed by some Democrats, including Sen. Chuck Schumer of New York, about the SEC's failure to require disclosures from public companies about campaign contributions, Tittsworth added.

Indeed, Schumer told White during the Tuesday hearing how disappointed he was that she has not put such a rulemaking on the agency's agenda.

“That issue alone may jeopardize consideration of the nominees,” Tittsworth said.

As to funding, White told the lawmakers that the SEC is “significantly under-resourced for our responsibilities,” noting that the agency's financial woes could be remedied by self-funding.

She noted her plea for increased funds has been mainly in the context to cover adviser exams as well as how the agency is “so outspent on the IT side by those we regulate.”

White also noted during her time as SEC chairwoman, the SEC has enhanced its oversight of FINRA and will continue to do so.

She added that Robert Cook, named by FINRA's board on Monday as the self-regulatory organization's new president/CEO, along with current CEO Richard Ketchum, are tremendous public servants that are very committed to investor protection.

Meanwhile. Sen. Bob Menendez (D-N.J.) told White to investigate whether illegal activities by municipal advisers added to Puerto Rico's plight. The Supreme Court on Monday rejected Puerto Rico's bid to let its public utilities restructure bonds over the objection of creditors, leaving the island's $70 billion debt crisis squarely in the hands of Congress.

Menendez sent a letter to White the same day stating that Puerto Ricans “deserve to know whether illegal activity contributed to the current [$71 billion] debt burden. Therefore, the residents of Puerto Rico and its municipal entities merit the full attention of the Securities and Exchange Commission to investigate any possible misconduct by financial advisers to municipal entities in Puerto Rico in the years leading to the current crisis.”

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SEC Fiduciary Rule Delayed Until Obama's Departure

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