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As ThinkAdvisor’s Melanie Waddell reported (Bill to Kill Fiduciary Rules by SEC, DOL Heads for House Vote), Rep. Ann Wagner’s (R-Mo.) HR 2374, was passed by the full House of Representatives yesterday. The “Retail Investor Protection Act,” as it’s euphemistically titled, was more accurately described by the Financial Planning Coalition (CFP Board, FPA, and NAPFA) in a letter sent on Monday to members of Congress, as “an investor protection bill in name only,” and “a ‘back door’ attempt to undermine investor protection provisions in Dodd-Frank…”
SEC Chairwoman Mary Jo White also weighed in on HR 2374 in a June 18 letter to House Financial Services Committee Chairman Job Hensarling (R-Texas), and ranking member Maxine Waters (D-Calif.), that Wagner’s bill would put “new restrictions on the commission’s authority that would make it difficult for the commission to adopt such a [fiduciary] rule should it determine to do so.”
Here’s what has these folks so worked up about what the Honorable Congresswoman herself describes as requiring the SEC “to perform some common-sense due diligence to determine whether any new rules are necessary.”
In its amazingly short four pages, the Wagner Bill calls for restricting the Department of Labor from redefining advisor fiduciary duties under ERISA until after the SEC issues its final ruling on a fiduciary standard for brokers, and then amending the Dodd-Frank Act to restrict the SEC from issuing any rules before doing the following:
— Identifying whether retail customers are really being “harmed or disadvantaged due to brokers or dealers operating under different standards of conduct” than investment advisors.
— Identifying where a uniform standard for broker and RIAs would “adversely impact retail investor access” to personalized investment advice;
—Having the chief economist of the SEC conduct assessments of the “qualitative and quantitative costs and benefits of the [Fiduciary] rule;
—Determining “that the benefits of the rule justify its costs” after assessing alternative rules, modifying existing regulation, and simplifying disclosures about existing standards; and
—Ensuring a new rule would “measure and seek to improve the actual results of regulatory requirements.”
The Financial Planning Coalition sums up the Wagner Bill this way: “…the passage of H.R. 2374 would substantially impede or completely prevent…long-needed rulemaking that would allow all investors to receive investment advice that is based on their best interests.” Such rulemaking, the Coalition letter stated, is “crucial to investor protection and would leave American investor s more vulnerable to potential abuses.”
To that, I can only add: Really? Seriously? Is there really a question about whether retail investors are being harmed by what study after study has shown to be the nearly universal belief that their broker has a legal obligation to act in their best interest? That the costs of acting in investors’ best interests really might somehow outweigh the benefits? Or the underlying implication that it would cost brokerage firms more to act in their clients’ best interests?
Or that a bill that makes these suggestions really could be called “The Retail Investor Protection Act?” And perhaps most disillusioning of all: That SIFMA could really get a Congresswoman, who tells us that “it’s the responsibility of Congress to intervene and stand up for hardworking American families” to put her name on such a bill.
Thankfully, the Senate has more sense (see Melanie’s updated story on the Wagner bill’s chances in the Senate).