Implementing Regulatory Harmonization at the SEC

Section 913 of the Dodd-Frank Act requires the U.S. Securities and Exchange Commission to conduct a study regarding gaps or deficiencies in the regulation of broker-dealers and investment advisers. These firms often perform similar functions but are regulated differently under an antiquated regulatory scheme. Section 913 sets forth detailed requirements for the SEC's study. Section 913 also provides the SEC with rulemaking authority to address the standard of care for brokers and advisers, although the SEC's new authority may be insufficient to address the study's findings. In light of this inconsistency between the scope of the study and the SEC's new authority, one might ask how the SEC should proceed. This short essay, prepared as part of a collection of papers on a fiduciary duty for broker-dealers, analyzes the requirement for the study, the authority to adopt new rules, and the gaps between these provisions. The essay suggests that one might best view section 913 as directing the SEC to move along two tracks. The first track is to conduct the required study independent of the rulemaking authority provided in section 913 and unburdened from a background requirement to address the study's findings. The second track, once the study is completed, is to prepare new rules, even if some of the SEC's conclusions cannot immediately be addressed through rulemaking and additional legislation is needed. I conclude that the SEC's rulemaking authority in section 913 ought not shackle the SEC's willingness to conduct a comprehensive study of broker-dealers and investment advisers