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Mary Schapiro and the Strange Case of ‘Business-Model Neutral’

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You gotta love Washington, D.C., I suspect there isn’t a greater source of amusement anywhere on the planet. Our leaders’ penchant for slapstick is great, but nothing tops their phrasing for brilliance. 

Where else could we find a continuation of current tax law called a “tax cut;” a minute reduction in a proposed colossal increase in future spending called a “spending cut;” families who make more than $250,000 a year “millionaires;” printing money to mask a severe recession “quantitative easing;” or the Fort Hood massacre “workplace violence”? This stuff is priceless. I should have been a political reporter, or at least a comedian (I know, what’s the difference?). These guys make it too easy. I’ll bet that if I covered Washington every day like AdvisorOne Washington bureau chief Melanie Waddell, I’d be chuckling all day long. 

Fortunately, the financial folks often step up to provide their share of levity, especially those wacky folks at FINRA, SIFMA and the CFP Board. But wait: they’re all in Washington, too. Coincidence? Hmmm. The latest “daffynition” to catch my eye comes from frequent contributor to the Occupy Seriousness cause SEC chair Mary Schapiro, who revved up an oldie but a goodie in a recent Bloomberg interview announcing that the Commission will issue a proposed fiduciary rule for brokers in the coming year, one that would be “business-model neutral, and allow brokers working with retail investors to sell proprietary products and charge commissions.” 

Schapiro’s a pro, there’s no doubt about it. While I believe that classic phrasing “business-model neutral” was actually coined by the lexicographers at SIFMA, Ms. Schapiro wields it with such grace and conviction as to make it her own. “Business-model neutral.” It just sounds so fair, so reasonable, so balanced. Who could oppose such an idea, or any regulation that was based upon it? We wouldn’t want to be “unfair,” or “anti-business,” or Earth-Mother forbid, “biased.” 

Here, I suppose, we’ve reached the point where it becomes clear why I’m not a political reporter, or even a comedian: I’m the nerd that can’t keep himself from asking “But what are we really talking about here?” Is the problem that Dodd-Frank is addressing a lack of business-model neutrality? And is “business-model neutrality” the standard by which all, most, or even any of our existing laws or regulations are measured? 

Perhaps I’m missing something here (this isn’t the first time that notion has come up), but aren’t our current drug laws patently biased toward legitimate drug companies and against sellers of heroin, crack cocaine and crystal meth? Personally, I agree with the late Nobel Laureate economist Milton Friedman that the vast majority of our drug problems would be solved by legalizing and regulating all drugs. And I’ve heard many good arguments in support of this position. But I’ve never once heard anyone suggest the our current drug laws be changed because they are aren’t “business neutral.” 

How about our gun laws? I’m just guessing that makers of automatic weapons would sell a whole lot more of them if Americans weren’t restricted from buying them, forcing many of us to buy guns from Colt and Smith & Wesson, who make non-automatic revolvers and pistols. Business-model neutral? Not on your life. 

I’m sure the list could go on and on. It seems that business-model neutrality often takes a back seat when matters of public policy or safety are at stake, as it should. 

Is protecting the investing public from deceptive, misleading or confusing sales practices really so different from other public policy issues that business neutrality should suddenly become the front-and-center issue?

Only in Washington—where allowing a homeowner to protect his family with the same AK-47 that apparently every bad guy from LA to Bagdad has is considered insane; but letting his retirement account be robbed blind by an “advisor” whom he thinks is his fiduciary is just business as usual. Like I said, you just can’t make this stuff up.


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