What SEC Wants For US Investment Market

Tom Burroughes, Group Editor, October 15, 2018


With some regulatory changes in the wealth industry up in the air, the SEC has set out goals for the next few years.

The main US financial regulator has set out ideas for improving how investment markets work at a time when more citizens will need to rely on their own retirement pots as tax-funded systems come under strain.

While not explicitly pitched at high net worth individuals, last week's strategy document from the Securities and Exchange Commission will help shape the overall market infrastructure, affecting wealth managers and their clients. 

The SEC strategy comes at a time when the Department of Labor’s Fiduciary Rule has been derailed by lawmakers over the past 12 months. This raises questions over whether the proposed law’s push for a “best interests” test of financial advice – encouraging a move towards fee-based advice rather than commission-led sales – will fall by the wayside. Some large firms, such as Merrill Lynch, have partly reversed course on how they charge for investment services. 

In its strategic plan announcement for the financial years 2018 to 2022, SEC chairman Jay Clayton set out ideas for investors, suggested innovations and highlighted performance issues. The document, issued late last week, announced five initiatives that the regulator wants to follow on investments:

-- Improving the SEC’s understanding of the channels retail and institutional investors use to access capital markets; 

-- Enhance how the regulator reaches out to the broader public in ways that reflect diverse business and investor populations; 

-- Crack down on misconduct that hurts retail investors, and examine problems; 

-- Make disclosure to investors that are more up to date so people can more easily understand information about their money; and   

-- Identify how to increase the number and range of long-term, cost-effective investment options available to retail investors, including expanding the number of companies that are SEC-registered and exchange-listed.

The strategy document also highlighted pain points such as the ever-present threat of cyber-security breaches, and concerns that new-tech areas such as initial coin offerings – how crypto-currencies come to the market – can attract fraudsters and illicit finance.

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