Industry groups opposing DOL fiduciary rule maximize spending on author of bill to kill measure

Brokerage industry dominates investment-adviser sector in political, lobbying spending

Aug 4, 2017 @ 4:23 pm

By Mark Schoeff Jr.

Several financial industry trade associations that oppose the Labor Department's fiduciary rule have maximized their campaign spending on the author of legislation that would kill the rule.

In the first half of year, the Financial Services Institute, the Securities Industry and Financial Markets Association, the Investment Company Institute and the National Association of Insurance and Financial Advisors have each contributed $10,000 to Rep. Ann Wagner, R-Mo., whose bill would eliminate the DOL regulation and replace it with a best-interest advice standard for brokers outlined in the measure. The figures are contained in the groups' filings with the Federal Election Commission.

Under campaign finance rules, a political action committee of an interest group can donate $5,000 per election — primary and general — during a campaign cycle. The 2018 campaign cycle runs from Jan. 1, 2017, through Dec. 31, 2018.

A discussion draft of Ms. Wagner's bill was debated by the House Financial Services Committee at a July 13 hearing. Four of the five witnesses at the session were opponents of the DOL rule who were chosen by the panel's majority Republicans. They included industry officials representing FSI, SIFMA and the American Council of Life Insurers, which has contributed $7,500 to Ms. Wagner.

Critics of Ms. Wagner's legislation contend that its disclosure-based best-interest standard for brokers is a weak substitute for the DOL rule, which they say mitigates broker conflicts of interest that can lead to the sales of inappropriate high-fee products that erode savings. No Democratic lawmaker backed Ms. Wagner's bill at the hearing.

Opponents of the DOL rule say that it is too complex and costly and will force brokers to abandon savers with small accounts. They also say that the Securities and Exchange Commission should take the lead on advice standards. Ms. Wagner's bill requires the SEC to promulgate the broker best-interest standard.

As she departed the hearing, Ms. Wagner denied that she wrote her bill to curry favor with industry critics of the DOL rule.

"Absolutely not," she told reporters. "We work with all [groups]. It's my job as a legislator to make sure that my constituents and the retail investors are taken care of. My sole purpose through this really five-year journey [of promulgating the DOL rule] has been to protect low- and middle-income investors because they are the ones that are being hurt the most by this onerous, overreach, federal government, Washington-knows-best Department of Labor fiduciary rule."

Ms. Wagner's congressional district encompasses the suburbs of St. Louis, which is the headquarters of several brokerages, including Edward Jones, Stifel, Scottrade and Wells Fargo Advisors.

Donations to Ms. Wagner's campaign are not meant to buy a bill, according to Dale Brown, FSI president and chief executive.

"We make contributions from our PAC to support candidates — both Democrats and Republicans — who share our view on the importance of access to advice for small investors," Mr. Brown said following the hearing.

The FSI spends money on both sides of the aisle. For instance, it has contributed $2,500 to Rep. Maxine Waters, D-Calif. and ranking member of the House Financial Services Committee, who opposes Ms. Wagner's bill and has been a stalwart supporter of the DOL rule. The NAIFA contributed to $5,000 to Ms. Waters.

Another high-ranking Democrat on the House financial panel, Rep. Carolyn Maloney of New York, has received campaign donations from the Insured Retirement Institute ($2,500), ICI ($8,000) and NAIFA ($2,500).

Brokerage industry trade associations give much more to all lawmakers' campaigns than organizations that represent investment advisers. Total spending in the 2018 cycle for FSI ($100,500), SIFMA ($246,000), ACLI ($412,500) and ICI ($741,000) dominates that of the Investment Adviser Association ($3,000), and the Financial Planning Association ($35,500).

There is the same disparity in lobbying expenditures, according to the Office of the House Clerk. For instance, in the first half of 2017, FSI ($300,000), IRI ($210,000), SIFMA ($3.4 million), NAIFA ($1.1 million) and ACLI ($2.1 million) spent many multiples more than IAA ($85,000) and FPA ($30,000).


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