If Democrats have success in taking control of the House of Representatives in the midterm elections, chairmanship of key committees and subcommittees with jurisdiction over the DOL and SEC will trade hands. This will give Democrats power to try to advance more strict consumer protections in the retail financial advice market, Nick Thornton writes on ThinkAdvisor.
If the Democrats win, Rep. Maxine Waters, D-CA is expected to chair the committee.
Rep. Waters has led calls from Democrats to impeach Trump. She was a dedicated supporter of the DOL’s fiduciary rule during the Obama administration. Additionally, she has been critical of the SEC’s proposal to enhance broker-dealers’ standard of care obligations to retail investors.
Upon the SEC’s last year release of Regulation Best Interest, Waters and a few other Democrat lawmakers called on the SEC and Chairman Jay Clayton, to advance a rule that “matches” the protections in DOL's fiduciary rule.
Rep. Waters and 34 Democrats from chambers of Congress submitted a comment letter to the SEC in September, alleging Reg Best Interest “falls woefully short of preventing some in the financial services industry to game the system and choose a standard of care that allows them to put their interests and profit motives ahead of their retail clients.”
Sen. Elizabeth Warren, Kirsten Gillibrand, Cory Booker, and Bernie Sanders were among the letter’s co-signers. The letter is critical of the SEC for taking a segmented approach in its proposed rules.
The proposed rules consist of separate proposals for broker-dealers and fiduciary advisors.
“The best way for the SEC to protect investors and reduce confusion is require all brokers and advisers, regardless of their titles, to comply with the same fiduciary standard that puts their clients’ interests first,” says the letter.
The letter suggests that the SEC willfully undermined the enforcement standard proscribed in the Dodd–Frank Wall Street Reform and Consumer Protection Act.
In creating Reg Best Interest, the SEC used a less particular subsection of Dodd-Frank to authorize the rules, which Waters and other Democrats argue resulted in watered down proposals.
“This decision has led to a less protective proposal for investors that applies two distinct standards: a best interest standard for brokers and a fiduciary standard for investment advisers, neither of which, as described by the Commission, matches the strong, enforceable standard set by Congress in 913(g),” the letter says.
The SEC is expected to finalize a rule in early 2019. If Democrats do take the House, they would have little legislative option to block implementation of Reg Best Interest.
If Democrats do win, a more prompt impact could be seen on the retirement policy. Rep. Richard Neal, D-MA is one of the most experienced lawmakers on issues of retirement.
Rep. Neal sponsored the Automatic Retirement Plan Act of 2017. The plan would require all but the nation’s smallest employers to sponsor a defined contribution retirement plan.
The bill provides tax credits over five years to cover the cost of plan administration.
