(Bloomberg) -- Even with Wall Street and consumer advocates allied in pushing for it, a U.S. Securities and Exchange Commission proposal to raise standards for brokers advising retail investors has run aground.
The SEC, which has been drafting a rule for almost two years, has scheduled no action on the measure as 2012 wanes and a presidential election approaches.
SEC Chairman Mary Schapiro, who pushed to include the measure in the Dodd-Frank Act to ensure clients receive equal treatment from brokers and investment advisers, said other rules will probably take precedence in coming months.
"It's important for us to get this done, but Congress handed us a lot of important things to do," Schapiro said in an interview. "We continue to advance this issue within the building and remain committed to it."
Dodd-Frank, the financial-regulation overhaul enacted in response to the 2008 credit crisis, instructed the SEC to consider mandating that brokers operate under a fiduciary standard as rigorous as that for investment advisers. Lawmakers sought the uniform standard to eliminate investor confusion over the roles of brokers and advisers, and to protect customers from being overcharged or sold inappropriate products.
Barbara Roper, director of investor protection for the Washington-based Consumer Federation of America, said there's rare common ground between Wall Street and consumer advocates on the need for the rule.
"It's hard to imagine how they could possibly get from where they are to a final rule in the remainder of this year," Roper said of the SEC. "It shouldn't have been this hard."
Schapiro declined to predict when the SEC will act on the rule, which is considered optional under Dodd-Frank. The agency is "steadily working through all the mandated rulemakings," she said.
Because it's not required, the rule could be dropped completely if Republican challenger Mitt Romney defeats President Barack Obama and installs a new SEC chairman.
Schapiro, facing pressure from those who want the change, meets tomorrow with a group of advocates including John Bogle, founder of mutual fund company Vanguard Group Inc. According to a statement, the group will present a "fiduciary declaration" signed by past regulators such as former FDIC Chairman Sheila Bair, former Federal Reserve Chairman Paul Volcker and Arthur Levitt, a former SEC chairman.
Retail investors typically put their money in the hands of broker-dealers or investment advisers. Brokers earn commissions on sales and work under a professional standard that requires them to promote products "suitable" for clients. Registered investment advisers work for set fees and manage portfolios under a standard that their advice be in customers' "best interests."
A 2011 SEC report -- opposed at the time by the agency's two Republican commissioners -- said consumers are often baffled by the distinction between brokers and advisers. The report recommended a uniform standard "to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser."
Schapiro called the change a priority and said in December that "it remains difficult to justify" two standards for the same type of advice.
In a departure from criticism of other Dodd-Frank rules, the Securities Industry and Financial Markets Association, the Wall Street trade group, supports the change.
"Sifma is very much in favor of establishing a new uniform fiduciary standard for both brokers and advisers where they're basically doing the same thing for retail customers," Ira Hammerman, Sifma's general counsel, said in an interview. "There are literally trillions of dollars of individual savings and investments that we're talking about here."
The fiduciary idea has taken "a back seat" to rules the SEC has to get done, Hammerman said, and it's "difficult to expect" the rule to be adopted this year.
Amid general agreement that investment professionals offering advisory services should act in their clients' best interests and operate under the same standards, there's division over how to implement a uniform fiduciary standard to the brokerage-industry business model, according to Steven Wallman, a former SEC commissioner and founder of online brokerage Folio Investing in McLean, Virginia.