Dodd and Frank reunite, take advisers behind the scenes of landmark legislation

Former Sen. Christopher J. Dodd and ex-Rep. Barney Frank defend sweeping regulatory reform

By Trevor Hunnicutt

Dec 11, 2013 @ 4:18 pm (Updated 4:42 pm) EST

Dod-Frank, Congress, regulatory reform, fiduciary harmonization

The architects of the most sweeping financial reforms since the Great Depression strode Wednesday into the lion's den: an assembly of financial advisers.

But if former Sen. Christopher J. Dodd, D-Conn., and former Rep. Barney Frank, D-Mass., felt any fear about their gladiators' task they didn't let on as they parried and even joked with a moderator about their namesake 2010 statute at a the MarketCounsel Summit in Las Vegas.

Speaking on a panel titled "What Were They Thinking?," Mr. Dodd and Mr. Frank relentlessly defended controversial provisions of their legislation, including the Volcker rule, which could remold the way financial planners, brokers and consultants do business once it is implemented by securities regulators.

The impact of the Dodd-Frank Act continues to evolve. Five financial regulatory agencies Tuesday approved a road map for implementing the Volcker rule, which curbs banks' ability to trade with the firm's own money.

But the discussion largely avoided regulatory topics directly concerning investment advisers, including efforts, in part spurred by Dodd-Frank, to harmonize the professional standards and regulations between industry-regulated broker-dealers and government-regulated investment advisers.

Mr. Dodd said that "candidly" it was an issue with a lot of tension. "It was one of those subject matters that we weren't able to address," he said.

"It got crowded out," Mr. Frank said. "That issue could not successfully compete for our attention with systemic risk," and the perception that large financial institutions would need to be subsidized in a crisis or pose a threat to the broader economy, he said.

The event was the first time the two have spoken together since they left office, according to Mr. Dodd. Mr. Frank has been notoriously outspoken. But Mr. Dodd, who in 2011 took the helm of the Motion Picture Association of America Inc., the Hollywood lobbying group, has been more circumspect in discussing his time in office.

Responding to questions posed by a reporter, Mr. Dodd said he employed a financial adviser, but did not know whether the adviser was a broker-dealer representative or a federally registered adviser.

And Mr. Frank described himself as a self-directed investor, only to later clarify that he processed orders for his investment of choice, Massachusetts general-obligation bonds, through a Morgan Stanley broker.

“I tell her what to do,” Mr. Frank said of his broker.

Both former politicians also expressed some strong views on investors and advisers.

Mr. Frank, for instance, said he is reluctant to let private groups handle regulation. “I do not like the SRO model,” he said, referring to self-regulatory organizations, such as the Financial Industry Regulatory Authority Inc., which oversees his broker.

And Mr. Dodd stressed the need for financial education, which was exposed by the financial crisis.

“Even among affluent people, it's amazing how little people understand,” said Mr. Dodd. “The level of education grew tremendously.”

The conference is sponsored by MarketCounsel, an organization that provides advisory firms with consulting on compliance, including the ongoing implementation of Dodd-Frank.