Funding for Reg BI, other SEC advice reform efforts denied in Waters amendment

House likely to approve the measure, but it would face an uphill battle in the Senate

Jun 25, 2019 @ 2:00 pm

By Mark Schoeff Jr.

The House of Representatives is likely to approve this week legislation written by House Financial Services Committee chairwoman Maxine Waters, D-Calif., that effectively would kill the Securities and Exchange Commission's investment advice reform package.

But the measure — an amendment to a spending bill — may not survive in the Republican-majority Senate. In addition, the Trump administration has issued a veto threat on the underlying financial services appropriations bill over an issue unrelated to the 46 amendments.

Ms. Waters' amendment would prohibit the SEC from using any of its spending authority from Congress to "implement, administer, enforce or publicize" the final advice reform package, which was approved 3-1 and includes the broker-dealer conduct standard Regulation Best Interest, the Form CRS client disclosure, an interpretation of the broker-dealer exclusion from adviser regulations and an interpretation of the standard of conduct for investment advisers.

The House is expected to begin voting on amendments to the spending bill later today and complete the debate over the legislation this week.

The Senate has not yet begun its appropriations process. The House and Senate would have to reconcile their spending bills by the end of September to avoid a government shutdown.

Paul Richman, chief government and political affairs officer at the Insured Retirement Institute, is hopeful Ms. Waters' amendment will die in the Senate.

"Over the last several years, the Senate has been more bipartisan and they have been very, very reluctant to include policy riders in their appropriations," Mr. Richman said.

Ms. Waters has criticized the SEC rule package as being too weak to protect investors from broker-dealer conflicts of interest. Like most of the financial services industry, IRI supports the SEC reforms and is lobbying House members to vote against Ms. Waters' amendment, which Mr. Richman said would "delay and deny a level of enhanced protection for consumers."

Republicans have supported the SEC's advice rules, including Senate Banking Chairman Mike Crapo, R-Idaho.

"It's going to have an uphill challenge," said Jason Rosenstock, partner at Thorn Run Partners, a government relations consulting firm. "It's going to become a question of potential dealmaking."

Ms. Waters' attempt to scuttle the SEC rule package through the appropriations process is similar to previous Republican legislative attempts to stop the Labor Department's fiduciary rule. Democrats resisted policy riders.

Even if Ms. Waters' amendment dies, it signals Democratic unrest over the SEC's approach to investment advice reform.

"It's more of a message to an SEC in a Democratic administration," Mr. Rosenstock said.

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