GOP zeroing in on fiduciary study

Senate memo asks regulators to slow down implementation of Dodd-Frank; single standard of care biggest concern

Feb 16, 2011 @ 4:03 pm

By Mark Schoeff Jr.

Average investors can weigh in on the debate in Washington over funding for federal financial regulators through a website launched today by advocacy groups. But it's unclear if the site will deter Republican efforts to slow down the implementation of the Dodd-Frank Act.

The campaign will revolve around, where people can go to voice opposition to cuts proposed to the budgets of the Securities and Exchange Commission and the Commodity Futures Trading Commission. Visitors to the portal will be able to send messages to their senators and congressional representatives.

A Republican bill being debated in the House today would reduced current SEC funding by $25 million for the rest of the year and would chop $189 million out of President Barack Obama's fiscal year 2011 request for the agency. It would cut $56 million from the current CFTC budget.

Republicans are signaling that they will keep the pressure on the SEC. GOP members of the Senate Banking Committee released a letter they sent yesterday to all federal financial regulators, asking them to slow down Dodd-Frank implementation.

“We are concerned that regulators are not allowing adequate time for meaningful public comment on their proposed rules,” the senators wrote. “We also believe that regulators are not conducting rigorous analyses of the costs and benefits of their rules and the effects those rules could have on the economy.”

Pointing to the dissent issued by SEC Commissioners Kathleen Casey and Troy Paredes, the senators cited the fiduciary duty study as one Dodd-Frank mandate that concerns them.

The proposal to cu the SEC budget is part of a larger GOP measure that would excise $61 billion from the so-called continuing resolution that is funding the government at fiscal year 2010 levels until March 4. The resolution is required to keep the government running because Congress failed to pass a new budget in October when the 2011 fiscal year began. If the impasse continues beyond March 4, the government might shut down.

Republicans assert that they are responding to voters who gave them a House majority last fall by taking forceful steps to reduce the federal deficit, which will total almost $1.5 trillion this year.

But Barbara Roper, director of investor protection at the Consumer Federation of America, said that the GOP has an ulterior motive. Cuts of the magnitude that the GOP is proposing are meant to “cripple the agencies and thereby derail Wall Street reform.”

Ms. Roper's organization and the Council of Institutional Investors have joined with to sponsor the website conduit for investor communication with Capitol Hill.

“Congress needs to see that this is something that matters to average middle-income Americans throughout the country,” Ms. Roper said.

Lack of resources at the SEC and CFTC endangers their ability to protect investors and monitor financial markets, according to Tracy Stewart, executive director of She also said that if the situation continues, it could become impossible to fully implement Dodd-Frank.

For instance, the law authorizes the SEC to promulgate a regulation that would impose a universal fiduciary duty on anyone providing personalized retail investment advice. The agency delivered a report on the topic to Congress last month but has not indicated whether or when it would move on to writing a rule.

Ms. Stewart said the rule could be delayed due to SEC funding problems. Even if the agency does proceed, it may not be able to enforce the law due to lack of staff.

“They would have no capacity to follow up on complaints,” Ms. Stewart said. “There would be no policing.”

Congressional Republicans argue that the SEC should more efficiently use its current budget of $1.1 billion before seeking more federal funds.

Ms. Roper counters that the SEC budget doesn't cost taxpayers anything because it is funded by the fees charged to regulated entities. The agency deserves an increase in resources because financial markets have become vastly more complex over the last 20 years, while its budget has stagnated.

“This is an agency that has been asked to do more with less for decades,” Ms. Roper said. “One billion dollars isn't a generous bonus pool for a Wall Street investment bank.”


What do you think?

View comments

Recommended next

Upcoming event

Oct 22


San Francisco Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print