Waters takes the reins of the Financial Services Committee from current Chairman Jeb Hensarling (R-Texas). Her focus has been much more investor centric, which contrasts sharply with Hensarling’s free market ideology. While Hensarling has attempted to dismantle regulation, including some of the Dodd-Frank Act, Waters is an advocate of Dodd-Frank and a supporter of the U.S. Department of Labor’s fiduciary rule, which would have increased protections for investors who roll over IRAs. The rule was gutted in court earlier this year.
“She’s as far left as Jeb is right,” said one veteran lobbyist who requested anonymity. “A lot of business folks don’t like her because she’s pretty left wing, advocates for the poorer people in her district and talks about confronting Republicans in public places. But she has a pretty good financial services staff. They’ll be the folks doing the hard work.”
Waters herself has been the subject of a House ethics investigation concerning her husband’s investment in a California bank. The scandal still dogs the lawmaker, especially on social media.
Waters was cleared of three charges that she and her grandson improperly used her position to “preserve her husband’s investment in OneUnited Bank.” Waters' was alleged to have taken extraordinary and unethical steps to ensure that taxpayers’ funds shored up her husband’s investment in the nation’s largest black-owned bank, which had tumbled from $350,000 to $175,000 after the mortgage banking crash. Waters investment, which was approximately 15 percent of the couple’s net worth in 2010, would have been worthless if Waters hadn’t succeeded in passing the Troubled Asset Relief Program (TARP) bill that allowed the Treasury Department to provide OneUnited with $50 million in assistance to cover expected losses from the collapse of mortgage giants Fannie Mae and Freddie Mac. Waters also arranged for meetings between OneUnited executives and key Treasury officials. The ethic’s case against Waters alleged she repeatedly acted on OneUnited’s behalf, despite warnings from then House Financial Services Committee Chairman Barney Frank (D-Mass.).
Waters has been a fairly vocal critic of the SEC's best-interest conduct proposal. She grilled SEC Chairman Jay Clayton during an oversight hearing in June, making it clear she believes the proposal falls short because it does not impose a fiduciary standard on brokers who offer investment advice.
"Don't you agree that it would be far simpler and clearer for investors to subject any broker that holds himself out as providing investment advice… to the [Investment] Advisers Act fiduciary duty and require them to put their clients' interests first?” Waters asked.
The 14-term congresswoman also took issue with the rule's limited prohibition on brokers’ use of the term "advisor" or "adviser," arguing that the proposal still leaves open a universe of other titles that give investors the mistaken impression that a broker is acting under the highest standards of conduct.
Clayton argued at the time that the business models and client relationships of investment advisors and broker-dealers are fundamentally different, making distinct but comparable regulatory frameworks appropriate.
While critics of the proposal can look forward to a series of fiery hearings under Water’s leadership, legislative changes to the SEC’s proposal are unlikely since the GOP is still holding the the majority in the Senate.
“Does the chair of the House Financial Services Committee have some authority? I’d say yes from the bully pulpit point of view, certainly,” said David Tittsworth, president and CEO of the Investment Adviser Association (IAA) for 18 years. “But absent a full legislative change…a statutory change that tells the SEC to do something different is very unlikely,” added Tittsworth, counsel in Ropes & Gray’s Washington, D.C. investment management practice.