CFA to Congress: Cost-Benefit Analysis Will Hamstring SEC's Fiduciary Rulemaking Process

Consumer advocates are urging members of Congress to not hamstring the Securities and Exchange Commission’s (SEC) efforts to craft a rule to put brokers under the same fiduciary standard as advisors by requiring a further cost-benefit analysis on such a rulemaking.

Barbara Roper, director of investor protection for the Consumer Federation of America (CFA), told members of the House Financial Services Committee in a May 9 letter “not to be swayed by misleading arguments from self-interested financial services groups” that a further cost-benefit analysis is needed on a fiduciary duty rule.

Roper noted in her letter that the SEC’s study regarding fiduciary duty, required under Section 913 of Dodd-Frank, “has won praise from leading broker-dealer trade associations as well as from traditional fiduciary advocates.” Despite that “important progress,” Roper continued, “some Members of Congress have written to SEC Chairman Mary Schapiro in recent weeks urging the agency to delay any rulemaking until it has done more study of the potential economic consequences.”

Those letters seeking to delay the rule “appear to have been influenced, at least in part, by misleading arguments from a small segment of the broker-dealer community intent on maintaining the status quo,” Roper wrote. “These brokers, particularly those whose business model depends on the sale of high-cost variable annuities, have argued that imposing a fiduciary duty on investment advice by brokers could have ‘unintended consequences,’ particularly for middle income and rural investors.”

Sen. Richard Shelby, R-Ala., ranking member on the Senate Banking Committee, along with other GOP members of the committee, wrote a May 4 letter to the Inspectors General at the SEC, FDIC, Commodities Futures Trading Commission (CFTC), the Treasury Department, and the Federal Reserve Board, asking that they “initiate a review of the economic analysis” performed by the regulatory agency under their supervision.