House panel approves legislation to kill DOL fiduciary rule, and 2 other adviser-related bills

The measures, which include revising the accredited investor standard and safeguarding those who report elder financial abuse, head to the House floor but face varying degrees of difficulty in the Senate

Oct 12, 2017 @ 4:40 pm

By Mark Schoeff Jr.

The House Financial Services Committee on Thursday approved legislation that would kill the Labor Department fiduciary rule and replace it with an investment advice regulation to be written by the Securities and Exchange Commission.

In a 34-26 vote along party lines, the panel sent the Protecting Advice for Small Savers Act to the House floor. The measure, written by Rep. Ann Wagner, R-Mo., reflects GOP concerns about the DOL rule, which requires brokers to act in the best interests of their clients in retirement accounts.

The committee also approved legislation that would revise the accredited investor standard to allow more people to buy unregistered securities and passed a bill that would provide legal protection for financial advisers who report senior financial abuse to authorities. Each of these measures received almost unanimous support.

The bills now go to the House floor, where votes have not yet been scheduled.

Ms. Wagner asserted that the DOL rule would sharply raise regulatory costs for brokers and force them to abandon investors with small accounts. Democrats opposed her bill, saying the DOL rule mitigates broker conflicts of interest that erode retirement savings.

Ms. Wagner's measure puts the fiduciary duty ball in the SEC's court, outlining a disclosure-based standard for brokers that she said would ensure they put clients' interests before their own. Brokers currently adhere to a suitability standard that requires them to sell investment products that meet a client's needs and risk appetite but allows them to select high-fee options.

The bill provides "a workable best-interest standard that improves upon the suitability standard without pricing investors with smaller accounts out of the market," Ms. Wagner said. "This is not about Wall Street. This is about low- and middle-income savers on Main Street."

Rep. Maxine Waters, D-Calif. and ranking member of the committee, said the DOL rule, which was partially implemented in June, is already protecting investors.

"If Representative Wagner and the Trump administration have their way, this victory for American seniors will be short-lived," Ms. Waters said. Ms. Wagner's bill would "allow brokers to put their own financial interest in fees and kickbacks ahead of their clients' interests."

Ms. Waters said she would be introducing a bill that would require the SEC, if it proposes a fiduciary regulation, to ensure it is "no less stringent than the fiduciary rule as promulgated by the DOL."

Opponents of the DOL rule urged the full House to approve Ms. Wagner's bill.

"The PASS Act represents an important step toward efficient and effective uniform standard of conduct regulation that would ensure Americans receive financial advice that is in their best interest while also maintaining access to the financial products and services they want and need," Dirk Kempthorne, president and chief executive of the American Council of Life Insurers, said in a statement.

Although the Wagner bill is likely to be approved by the House, it's fate in the Senate hinges on garnering the support of at least eight Democrats to overcome a filibuster.

The other two bills likely can clear that hurdle, if Senate Democrats support them to the extent that Democrats on the House committee did.

The legislation to reform the accredited investor standard would allow people with special expertise, such as financial advisers, to buy unregistered securities, even if they don't meet the required net worth or income thresholds.

The Senior Safe Act would shield from lawsuits financial advisers who report financial abuse of the elderly, if they have undergone appropriate training to identify such situations. One of the authors, Rep. Kyrsten Sinema, R-Ariz., said seniors are increasingly vulnerable.

"This bipartisan solution is more important now than ever," she said.

The Financial Services Institute backs the bill.

"The Senior Safe Act is a critical step in preventing elder financial abuse nationwide," FSI president and chief executive Dale Brown said in a statement. "It allows financial professionals to report abuse to government organizations, without violating privacy laws, as well as standardizes training to help identify and report instances of suspected abuse."


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