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US Securities and Exchange Commission

Senate Panel to Vote on Roisman Nomination for SEC Seat

Thomson Reuters Tax & Accounting  

· 5 minute read

Thomson Reuters Tax & Accounting  

· 5 minute read

The Senate Banking Committee scheduled its vote to consider the nomination of Elad Roisman to fill a Republican seat on the SEC. Roisman, if he is confirmed by the full Senate, will serve a five-year term that ends in 2023.

The Senate Banking Committee is scheduled to vote on the nomination of Elad Roisman to fill a Republican seat on the SEC on August 2, 2018.

The vote comes a little more than a week after a confirmation hearing in which the panel grilled Roisman on the SEC’s proposed best interest standard for broker-dealers, enforcement priorities, and other matters. President Donald Trump in June nominated Roisman, the Senate Banking Committee’s chief counsel, to fill a seat vacated by Michael Piwowar.

Roisman, if he is confirmed by the full Senate, will serve a five-year term that ends in 2023. He would be the latest former Banking Committee staffer to sit on the commission; Piwowar, Democratic Commissioner Kara Stein, and Republican Commissioner Hester Peirce are also former Banking Committee staffers. The panel is responsible for the Senate’s oversight responsibilities for the SEC and other financial regulators.

Roisman served as counsel to former SEC Commissioner Dan Gallagher from 2012 to 2014. He previously worked as an attorney at NYSE Euronext Inc., the predecessor company to the current owner of the New York Stock Exchange, and at the law firm of Milbank, Tweed, Hadley & McCloy LLP.

Roisman appears to have little standing in the way of his confirmation. Senate Banking Committee Chairman Mike Crapo, an Idaho Republican, has praised Roisman for his “impressive command of securities law, his keen intellect and work ethic, and his commitment to doing what is right.”

In his July 24 confirmation hearing, Roisman said the market regulator “must examine and re-examine its rules, regulations and guidelines to ensure that they are still working as intended to accomplish the SEC’s mission.” But he was reluctant to opine on matters that would come before him as a commissioner. Democratic senators grilled the nominee on his position on the SEC’s proposal in Release No. 34-83062, Regulation Best Interest, which requires broker-dealers to act in the best interest of their clients and sets out new disclosures designed to ward off conflicts of interest.

Critics say the rule falls well short of a true fiduciary standard and provides investors with little more protection than the current “suitability standard” applied to brokers. The suitability standard, enforced by the Financial Industry Regulatory Authority (FINRA), requires brokers to recommend financial products that meet their clients’ broad investment needs.

House and Senate Democrats have urged the SEC to align its proposal with the Labor Department’s far-tougher fiduciary standard for retirement investment advisers, which the DOL shelved after the U.S. Court of Appeals for the Fifth Circuit vacated the rule in March.

Roisman, in his testimony, echoed talking points of the critics of the DOL standard, saying the SEC should assess whether its rule preserves investor choice, avoids predicting winners and losers, and is “business-model neutral.”

“I think it’s important for there to be investor choice in different types of services provided to investors,” and for investors to understand the nature of the relationship with their financial services provider and address conflicts of interest, Roisman said. The SEC, he said, has traditionally been a disclosure-focused agency.

Sen. Elizabeth Warren, a Massachusetts Democrat, questioned Roisman about the conflicts in the brokerage industry that “cost American families billions every year, draining their hard-earned savings.”

“Why should your broker be able to have serious conflicts of interest, like receiving monetary rewards or other perks for recommending certain investments, even if those investments are not in the customer’s best interest?”

The Labor Department rule, which had been delayed by the time the Fifth Circuit vacated it, explicitly required retirement investment advisers to act in the best interest of their clients and limited certain compensation practices, such as commissions. Opponents of the DOL rule said the issue was more appropriate for the SEC, which gained the authority to set a best-interest standard under the Dodd-Frank Act.

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