With Democrats leading Republicans in the polls with less than two weeks from mid-terms, the possibility that the House of Representatives will flip looms large. And if that happens, Rep. Maxine Waters (D-Calif.) would become chair of the House Financial Services Committee.
A new Ipsos poll found that 49 percent of voters said they would vote for the Democratic candidate in their district, compared to 42 percent who said they will back their Republican candidate. A Real Clear Politics poll put Democrats ahead by 7.2 points.
So just what would a Waters chairmanship mean for the securities industry and especially for the Securities and Exchange Commission’s controversial best-interest proposal, which is ostensibly designed to create “separate but equal” regulations for brokers and advisors?
The fiery California congresswoman was among the Trump opponents targeted by mailed packages containing pipe bombs this week.
"We have to keep to doing what we’re doing in order to make this country right. That’s what I intend to do, and as the young people say, 'I ain’t scared,’” Waters told media company Blavity after two bombs addressed to her were discovered at mail centers in Los Angeles and the Washington, D.C., area. Eight other Democratic politicians and left-leaning figures also were the targets of pipe bombs.
Waters has been a harsh critic of teh SEC's best-interest proposal. She gave SEC Chairman Jay Clayton a grilling 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 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 or who engages in advisory services 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 other titles that give investors the mistaken impression that a broker is acting under the highest standards of conduct.
"The proposal would only prohibit brokers from calling themselves 'advisors,' and fails to address the numerous other titles that may be used, like 'financial planner,' or 'wealth manager,'" Waters told Clayton.
Clayton pushed back against Waters in June and is unlikely to back down much in the future, even if the House flips.
Clayton argued that the business models and client relationships of investment advisors and broker-dealers are fundamentally different, making distinct but comparable regulatory frameworks appropriate. In a fee-based advisory model, clients expect a holistic service, where the advisor develops strategies to meet goals like retirement planning or paying for college, Clayton explained. In a brokerage relationship, by contrast, the client comes to the broker for specific investment recommendations on an "episodic" basis, he said.