Sen. Elizabeth Warren, D-Mass., is calling for a Securities and Exchange Commission investigation of financial firms she says are making contradictory statements about a Labor Department investment advice rule.
In a letter Thursday to SEC Chairwoman Mary Jo White, Ms. Warren said executives from four insurance companies — Lincoln National, Jackson National Life Insurance Company, Transamerica and Prudential Financial — have both criticized the DOL measure as “unworkable” and harmful to their firms and separately told investors they will be able to adjust to the rule and continue to be profitable.
The firms may be violating securities laws by sending misleading signals about market factors that could affect their earnings and stock prices, according to Ms. Warren.
“Both sets of industry claims — that the proposed rule will harm them and their business model, and that the proposed rule will not harm them and their business model — cannot possibly be true,”
Ms. Warren wrote. “And if one [of] these public statements is materially false, it would appear to violate long-standing interpretations of our securities laws.”
Ms. Warren compared negative assessments of the DOL rule in the companies' comment letters to reassuring statements by firm executives in conference calls with investors. She noted that the SEC has pursued cases against CVS Caremark Corp. and Citigroup over alleged misleading information provided on investor calls.
“While I am hesitant to make a direct accusation that these companies have violated the securities laws with their directly contradictory statements about the impact of the DOL Conflict of Interest rule on their business models, I believe the circumstances justify initiating a prompt and thorough SEC investigation,” Ms. Warren wrote.
An SEC spokesman declined to comment.
Lincoln denied that it's saying different things to regulators and investors about the DOL rule.
“In our comments to the DOL, we have requested modest changes to the proposed rule which would better allow consumers to have continued access to retirement products that offer guaranteed lifetime income,” Eric Samansky, Lincoln Financial Group spokesman, said in a statement. “In our comments to investors, we have explained how we could respond to the rule in the event of a sales disruption as a result of consumers' more limited access to these products. These comments, which address different issues, are in no way contradictory, and we stand by them.”
Prudential spokesman Scot Hoffman and Transamerica spokesman Gregory Tucker re-released statements they made defending their firms last month, when
Ms. Warren sent a similar letter about the insurance firms' rhetoric to Labor Secretary Thomas Perez and Shaun Donovan, director of the Office of Management and Budget.
A spokeswoman for Jackson National did not respond to a request for comment.
Ms. Warren, a prominent Wall Street critic, has been one of the leading advocates for the DOL rule, which is being
reviewed by OMB and may come out in final form next week. She and other proponents say the rule is necessary to protect workers and retirees from conflicted advice that results in high investment fees and erodes savings.
Critics say the rule is too complex, will sharply raise the costs of investment advice and price savers with modest assets out of the advice market. Insurance firms, represented by the American Council of Life Insurers, are especially worried about its impact on annuity sales.
“ACLI and its member companies have been clear and consistent: While life insurers may have no choice but to conform to the Labor Department's final fiduciary regulation, the proposal as drafted would hurt lower- and middle-income consumers preparing for retirement,” ACLI spokesman Whit Cornman said in a statement.
