Seven financial services industry and consumer organizations are protesting a bill pending in Congress that the organizations say would harm consumers by hindering the Department of Labor and SEC from making changes to the definition of a fiduciary.
In a letter dated Tuesday to Rep. Jeb Hensarling, chairman of the House Financial Services Committee, and Rep. Maxine Waters, ranking member of the committee, the organizations ask that the two members of Congress oppose the Retail Investor Protection Act (H.R. 2374). The bill is sponsored by Rep. Ann Wagner, R-Missouri, and was considered by the Financial Services Committee Wednesday.
The bill was released from the committee by a vote of 44 to 13 with Hensarling voting for it and Waters against. Daniel F. Drummond, director of public relations for the Certified Financial Planner Board of Standards, says the organizations will continue their opposition to the bill as it makes its way through Congress.
The Department of Labor and the SEC are both considering rule changes that would alter the definition of a fiduciary under the Employee Retirement Income Security Act (Erisa) and the Investment Advisers Act of 1940, respectively.
The bill sponsored by Wagner would alter the rulemaking process in such a way that it would harm consumers, according to officers from the organizations signing the letter. The organizations are AARP, the CFP Board, the Consumer Federation of America, the Financial Planning Association, the Investment Adviser Association, the National Association of Personal Financial Advisors and the North American Security Administrators Association.
The organizations object to the cost-benefit analysis that would be required of the SEC under the Wagner bill before it could approve a change in fiduciary rules.
“We certainly believe that all of the SEC’s proposed rules should undergo appropriate economic analysis before adoption,” the letter says, “but this legislation imposes extraordinarily rigorous cost-benefit analysis requirements that would delay (or even prevent) the rulemaking and increase the likelihood of it being struck down by the courts upon legal challenge.”
It also requires the DOL to wait until 60 days after the SEC acts before it can act on a rule change regarding the fiduciary definition.
This “not only unnecessarily slows DOL’s rulemaking, but it potentially halts DOL’s rulemaking altogether if the SEC does not act,” the letter says. DOL should be allowed to exercise its normal rulemaking process without being tied to a separate agency acting under a separate statute, the organizations say.
The organizations say the Wagner bill would hurt investors rather than help them by making it too difficult to make the needed rule changes.