Republicans on the House Financial Services Committee are watching carefully to see how the SEC proceeds with a rule that would subject broker-dealers to a fiduciary duty.
Republicans on the House Financial Services Committee are watching carefully to see how the Securities and Exchange Commission proceeds with a rule that would subject broker-dealers to a fiduciary duty.
Even though the agency has not come out with a fiduciary regulation under the authority given to it in the Dodd-Frank financial reform law, the GOP is concerned.
An SEC staff study delivered to Congress in January recommended universal fiduciary duty to ensure that anyone providing retail investment advice is acting in the best interests of clients.
Currently, brokers adhere to a less stringent suitability rule. The SEC report said that such a rule would better protect investors confused about the differing standards that investment advisers and broker-dealers must meet.
The study and the potential rulemaking worry Rep. Judy Biggert, R-Ill., a member of the House Financial Services Committee.
“I'm concerned that they've gone much too far,” Ms. Biggert said in an interview Friday following a press conference in which she and her GOP colleagues criticized the Dodd-Frank law as it nears its first anniversary.
“It's really putting a damper on some of the financial people who are helping … small investors,” Ms. Biggert said.
“They're afraid to talk to anybody.”
Congress cannot stop the SEC from issuing a fiduciary-duty rule, because Dodd-Frank allows it to move forward. But the agency has made a point throughout Dodd-Frank implementation of listening to input from Capitol Hill and a variety of interest groups.
GOP members of the House financial panel in March sent a letter to the agency asking it to hold off on a fiduciary-duty rule until the agency had done more economic analysis of its impact on the investment advice market.
They were following the lead of the two SEC Republican commissioners — Kathleen Casey and Troy Paredes — who made the same point in their dissent to the SEC fiduciary report.
Ms. Biggert said that she and her GOP colleagues “haven't come to a committee decision” on whether to ask the SEC to forgo a fiduciary-duty rule.
At the Friday press conference, financial panel Republicans excoriated the Dodd-Frank law, asserting that it is a complete failure nearly one year after it was enacted. They said that the law undermines the economic recovery.
“The Dodd Frank Act burdens the private sector with 400 new requirements over the next several years,” said Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee. “The vast majority of these rules have created an atmosphere of uncertainty in which innovators, job creators and lenders can't put their ideas and capital to work, because they don't know the rules with which they must comply.”
In a press conference July 11, one of the bill's authors, Rep. Barney Frank, D-Mass., defended the measure, saying it will prevent another financial crisis like the one in 2008 that catalyzed the recession. He said the measure curtails risky loans, tightens derivatives regulation, increases consumer protections and ends financial bailouts.
“Yes, it is disruptive because we had to disrupt a rotten system, which collapsed,” Mr. Frank said. He added that Republicans are not calling for major changes in the statute, because “it is still too popular” with voters.
