Fivethirtyeight.com puts the Democrats' chances offlipping the 23 seats needed to gain a 218-seat majority in theHouse at 81.5 percent. (Photo: Shutterstock)

If Democrats succeed in taking control of the U.S. House of Representatives in next month'smidterm elections, chairmanship of key committees and subcommitteeswith jurisdiction over the Securities and Exchange Commission and theLabor Department will trade hands, giving Democrats power to try toadvance more stringent consumer protections in the retail financialadvice market.

Fivethirtyeight.com puts the Democrats' chances offlipping the 23 seats needed to gain a 218-seat majority in theHouse at 81.5 percent. The website also put Hillary Clinton'schances of winning the 2016 presidential election at 71.4percent.

Should the Democrats win, Rep. Maxine Waters, D-CA, currentlythe ranking member of the House Committee on Financial Services, isexpected to chair the committee, which has jurisdiction over theSEC.

Waters has led calls from Democrats to impeach President Trump.She was also a staunch supporter of the Labor Department'sfiduciary rule during the Obama administration and has beencritical of the SEC's proposal to enhance broker-dealers' standardof care obligations to retail investors.

Upon the SEC's release of Regulation Best Interest last spring, Watersand three other Democrat lawmakers called on the SEC and itsChairman, Jay Clayton, to advance a rule that “matches” theprotections in Labor's fiduciary rule.

Comment letter to SEC

In September, Waters and 34 Democrats from both chambers ofCongress submitted a comment letter to the SEC, alleging Reg BI“falls woefully short” of preventing some in the financial servicesindustry to “game the system and choose a standard of care thatallows them to put their interests and profit motives ahead oftheir retail clients.” Senators Elizabeth Warren, KirstenGillibrand, Cory Booker, and Bernie Sanders, all said to beexploring a presidential run in 2020, were among the letter'sco-signers.

The letter is critical of the SEC for taking a segmentedapproach in its proposed rules, which include separate proposalsfor broker-dealers and for fiduciary advisors.

“The best way for the SEC to protect investors and reduceconfusion is require all brokers and advisers, regardless of theirtitles, to comply with the same fiduciary standard that puts theirclients' interests first,” the letter says.

The letter strongly implies that the Commission willfullyundermined the enforcement standard proscribed in the Dodd–FrankWall Street Reform and Consumer Protection Act, a bill passed inthe wake of the financial crisis when Democrats controlled bothchambers of Congress and the White House.

In crafting Reg BI, the SEC used a less specific subsection ofDodd-Frank to authorize the rules, which Waters and other Democratsclaim resulted in watered down proposals.

“This decision has led to a less protective proposal forinvestors that applies two distinct standards: a best intereststandard for brokers and a fiduciary standard for investmentadvisers, neither of which, as described by the Commission, matchesthe strong, enforceable standard set by Congress in 913(g),” theletter says, referencing the section of Dodd-Frank that gives theSEC authority to establish a fiduciary duty for broker-dealers.

A Chairman Neal may have more recourse on retirementissues

The SEC is expected to finalize a rule as early as the beginningmonths of 2019.

Were Democrats to take the House they would have littlelegislative recourse to block implementation of Reg BI. TheCongressional Review Act gives Congress a timetable in which it canoverturn administrative agency rulemaking.

But that route would require Democrats to take the Senate too,where a simple majority is required to overturn regulations underthe CRA. It would also require a signature from PresidentTrump.

A more immediate impact if Democrats win the House could be seenon the retirement policy front. Rep. Richard Neal,D-MA, ranking member of the House Ways and Means Committee, is oneof the chamber's most experienced lawmakers on retirementissues.

Last year, Neal sponsored the Automatic Retirement Plan Act of2017,  which would require all but the nation'ssmallest employers to sponsor a defined contribution retirementplan.

Neal's bill does not mandate employer contributions and sets anautomatic deferral rate at 6 percent of salary. The bill providestax credits over five years to cover the cost of planadministration.

Neal also introduced the Retirement Plan Simplification and Enhancement Actof 2017, which exempts qualified retirement accounts with lessthan $250,000 in assets from existing required minimum distributionrules. It also expands the Saver's credit to more taxpayers.

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