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Industry Groups Fear Wagner Bill Will Stop SEC, DOL Fiduciary Rules in Their Tracks

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Industry trade groups worry that a bill that was reported out of the House Financial Services Committee Wednesday and referred to the House Education and Workforce Committee for consideration will stop the Securities and Exchange Commission and Department of Labor’s fiduciary rules in their tracks.

The bill, the Retail Investor Protection Act, which passed by a 44-13 vote, was introduced by Rep. Ann Wagner, R-Mo., and would require that the Department of Labor wait to repropose its fiduciary rule until 60 days after the SEC issues its fiduciary proposal.

Wagner’s bill would also have required that the SEC conduct a more stringent cost-benefit analysis than the one it is currently undertaking, but that language was taken out by an amendment put forth by Rep. Patrick Murphy, D-Fla., and approved by voice vote.

Ranking Member Maxine Waters, D-Calif., also failed to get her bill giving the SEC the authority to assess user fees to fund advisor exams attached as an amendment to Wagner’s legislation. Both House Financial Services Chairman Jeb Hensarling, R-Texas and Rep. Scott Garrett, R-N.J., rebuffed the amendment arguing that it was not “germane.”

Industry trade groups sent a joint letter to the House Financial Services Committee the same day stating that “despite its name,” Wagner’s bill, H.R. 2374, “is not an investor protection bill. To the contrary, it would leave American investors with significantly less protection.”

The groups—which included the Investment Adviser Association, the Financial Planning Association, the CFP Board, the AARP, the North American Securities Administrators Association and the National Association of Personal Financial Advisors—said the bill also “imposes unnecessary and onerous rulemaking requirements that the SEC must meet before it can adopt a fiduciary rule.”

The groups also said that Wagner’s bill “linking” the DOL and SEC rulemakings would not only prevent the DOL from moving forward with a rule on the definition of fiduciary under ERISA, but the bill “potentially halts DOL’s rulemaking altogether if the SEC does not act on a fiduciary rule.”

However, Rob Smith, president of the National Association of Insurance and Financial Advisors, says NAIFA agrees with Wagner “that if the SEC is going to proceed on a rule, then they should demonstrate how the rule will resolve any harm to consumers, and that they should go before the DOL.”

SEC Chairwoman Mary Jo White (Photo: AP)SEC Chairwoman Mary Jo White (right) told House Financial Services Committee Chairman Job Hensarling, R-Texas, and ranking member Maxine Waters, D-Calif., in a June 18 letter that Wagner’s bill, H.R. 2374, places “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.”

Section 913 of the Dodd-Frank Act, White told the lawmakers, “added new express authority for the Commission to adopt a uniform fiduciary standard of conduct and to consider other potential options for the harmonization of the regulation of broker-dealers and investment advisers.” Although there are differing views on this issue, she said, “many investor advocates and industry participants support the establishment of a uniform fiduciary standard of conduct.” Any rulemaking under Section 913, White went on to say, “would include a rigorous economic analysis. If, after such fact-finding and deliberations, the Commission should determine to propose a uniform fiduciary standard of conduct, H.R. 2374 would layer on new statutory requirements for the Commission to satisfy before finalizing any such rules, which could impede this investor focused initiative in what already has been a multi-year process.”

If approved by the House, the question remains whether the issue will be taken up in the Senate.

David Tittsworth, executive director of IAA, says that “assuming that the bill passes in the House, it appears that the Senate does not have any current plans to consider similar legislation.”

However, he adds, “I expect that the insurance and brokerage groups that oppose DOL’s fiduciary rulemaking will continue to be active on Capitol Hill and I would not underestimate their ability to influence members in both the House and the Senate.”

Duane Thompson, policy director for fi360, adds that while he believes “the odds of H.R. 2374 becoming law are extremely low, even if it passes the House,” if the Republicans “take control of the Senate and retain the House in the next election, then all bets are off.”

Check out DOL’s Borzi: Lawmakers Can’t Hold Back Fiduciary Plan on AdvisorOne.


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