Politics, Regulation & Compliance
Advisors got a shock in mid-February when the LaborDepartment allowed the Trump-era fiduciary prohibitedadvice exemption to align with the Securities and ExchangeCommission’s Regulation Best Interest to go into effect. Alleyes now will be on whether new Labor Secretary MartyWalsh expands the fiduciary definition under the EmployeeRetirement Income Security Act and modifies other prohibited transaction exemptions later this year.
“With regard to the fiduciary definition, I believe that the
DOL would like to bring it more in line with the SEC’s best
interest rules for broker-dealers and investment advisors,
where a single recommendation is subject to the best-interest
standard,” said ERISA attorney Fred Reish of Faegre Drinker.
Under Walsh, who will be a “fiduciary proponent,” Reish said,
“we can expect other existing exemptions, for example, PTE
What will Gary Gensler
tackle first as he assumes
the role of chairman of the
SEC? At his confirmation
hearing before the Senate
Banking Committee — in
which he was peppered with
questions from lawmakers
about the GameStop trad-
ing frenzy — Gensler laid
out the steps he’d consid-
er to address recent mar-
ket volatility related to the
GameStop Reddit squeeze,
as well as his approach to regulating cryptocurrencies.
Potential regulatory measures tied to the burst in the
trading of some stocks could come first for Gensler, but
he’s also signaled to senators that he’s in favor of cryp-
tocurrency innovation. A professor of blockchain, digital
currency, financial technology and public policy at MIT,
Gensler has said he’d work with “fellow commissioners
to both promote the new innovation but also at the core,
ensure for investor protection.”
Mellody Hobson is presi-
dent and co-CEO of Ariel
Investments — the first
Black-owned mutual fund
company, which has about
$15 billion in assets. She
also chairs the board of
Starbucks, making her the
first Black chairwoman of
an S&P 500 company.
Hobson is unusual in the
financial industry in another
way: She’s spent her entire
career at Ariel Investments,
starting in 1991 after graduating from Princeton University.
She became its president in 2000 and co-CEO in 2019.
In February, she announced the formation of Ariel
Alternatives, an affiliate of Ariel Investments whose first ini-
tiative, Project Black, will invest in middle-market companies
with the aim of transforming them into certified minority-
owned business enterprises of scale and developing a new
class of Black and Hispanic entrepreneurs. JPMorgan Chase
has committed up to $200 million for Project Black.
“The time is right for the formation of an investment firm
that scales sustainable, minority-owned businesses by simulta-
neously solving for two critical factors: capital and customers,”
wrote Hobson recently.
Meanwhile, Ariel Investments’ three actively managedU.S.-focused mutual funds are enjoying strong performance.They outperformed their peers last year and year-to-date,as value investing in small- and mid-cap stocks has stageda comeback.
Federal Reserve Chair Jerome Powell has maintained near-zero interest rates underpinning a record rally in stocks,which is why Wall Street is so focused on when the Fedmay reverse its lower-for-longer rate strategy and reduceits monthly $120 billion purchases of U.S. Treasuries andmortgage-backed securities. Janet Yellen, Powell’s predecessor at the Fed, is now the first female Secretary of theTreasury. She has the responsibility for the U.S. economicrecovery and getting relief to those who need it most.