Reactions to passage of the landmark re-write of financial services reform that the Senate passed Thursday, July 15, were swift. The Financial Planning Coalition released a statement saying the legislation laid the foundation for vital consumer protection in two key areas: the fiduciary standard of care and the regulation of financial planners.
The final version of the financial reform legislation approved by the Senate and awaiting President Obama's signature, gives the SEC rulemaking authority, after a six-month study of advisor and broker/dealer obligations, to extend the fiduciary standard of care to brokers who give retail investment advice to individuals. The bill also requires a study by the Government Accountability Office (GAO) on the need for regulation of the financial planning profession. Currently, the Coalition states in its release, "there is no oversight of the profession; anyone can call himself or herself a financial planner without meeting any competency or ethical standards. The Financial Planning Coalition found in a January study that 83% of American consumers support the regulation of financial planners."
"Straightforward, commonsense regulations for the financial planning profession are needed to help consumers identify qualified and ethical financial advisors," said Bob Glovsky, 2010 Chair of the Board of Directors for the Certified Financial Planner Board of Standards, Inc., said in the Coalition release. "Current laws do not offer enough protection for consumers from abuse by financial advisors. The Financial Planning Coalition has found this to be the case in our own studies; we are pleased that the GAO is undertaking its own study and we expect that it will echo our findings."
U.S. Treasury Secretary Timothy Geithner released a statement on July 15 in which he said that the passage of the reform bill by the Senate "is the beginning, not the end, of the process of financial reform." As soon as the President Obama signs this bill into law, he said, "We will move forward to design and implement these new protections and to consolidate responsibility and authority." These reforms, Geithner continued, "place an enormous burden of responsibility on the shoulders of those who lead our financial regulatory agencies. They recognize that responsibility."
Overall, Geithner said, Rep. Barney Frank (D-Massachusetts), chairman of the House Financial Services Committee, and Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) "crafted the strongest financial reforms this country has considered since the Great Depression. They took the best ideas available--from Republicans as well as Democrats--and they put together a tough overhaul of our financial system."
But Republicans like Senator Bob Corker (R-Tennessee), one of the lead negotiators on the bill who ended up voting against it, released a statement saying the reform bill is a "net negative" for the American public. The bill, Corker says in his statement, "will make credit less available and more expensive, expand government bureaucracy, and hurt small- and medium-sized businesses."
"I think I worked as hard as anyone in the Senate toward meaningful, bipartisan reform, but this legislation misses the mark," Corker said. "It overreaches in areas that have nothing to do with this crisis or future financial stability and totally disregards some of the core issues that got us in this situation. In the final analysis, for the average American and most small businesses, this bill will cause credit to be less available and more expensive, dramatically increase the size of the federal bureaucracy, and do more to hurt community banks than to reform our country's financial infrastructure. There will be unintended consequences, and over time, I believe it could disadvantage our country in the global marketplace."