The upset election last week in Massachusetts of Scott Brown to the Senate will have a more modest impact on financial services regulatory-reform legislation than on health care reform. But the stunning result will give GOP members of the Senate Banking Committee a stronger hand in shaping financial reform.
That at least is the assessment of groups that represent financial advisers and financial services consumers.
“The impact will be, the Republican members of the Senate Banking Committee have a strong hand in negotiations over the pending legislation,” said David Bellaire, general counsel and director of government affairs for the Financial Services Institute Inc., which represents regional firms that are dually registered broker-dealers and investment advisers.
“Brown's election may be a sign to them that if they can hold out several months, they may have more votes and more Republican members of the committee, and they can reach a better deal at that point in time,” he said.
Already in jeopardy is the administration proposal for a consumer financial protection agency. Senate Banking Committee Chairman Christopher Dodd, D-Conn., reportedly is signaling that he would be willing not to establish a separate agency, strongly opposed by banks, as long as another agency, such as the Treasury Department, got a new consumer protection division.
Still, there is bipartisan momentum behind regulatory reform, said Marilyn Mohrman-Gillis, managing director of public policy for the Certified Financial Planner Board of Standards Inc.
“There were things happening even before Massachusetts, in terms of narrowing the bill, that may still continue to happen after Massachusetts,” she said. Mr Dodd has paired Republican and Democratic members of his committee to work out compromises on financial-reform legislation.
There is widespread agreement among members of the industry and Congress that financial services professionals who give investment advice should come under some type of fiduciary standard, Ms. Mohrman-Gillis noted. “It's just a question of how it's done,” she said.
The Wall Street Reform and Consumer Protection Act of 2009, approved Dec. 11 by the House of Representatives, would empower the Securities and Exchange Commission to set forth fiduciary standards by which all advisers would have to abide.
Draft legislation that Mr. Dodd introduced in November would remove the broker-dealer exemption from the Investment Advisers Act of 1940. As a result, all brokers giving advice would have to be registered investment adviser representatives.
Advisory groups favor the Senate approach, while broker groups generally favor the House bill's provision.
Part of the message of the Massachusetts election “is that economic concerns are a high priority for the American people,” said David Tittsworth, executive director of the Investment Adviser Association.
“If anything, the results of the [election] are going to add impetus to get something done on financial services regulatory reform,” he said. “People are worried about their own financial security.”
Moreover, while Senate Democrats will lose their filibuster-proof majority, Democrats “never had 60 reliable votes on any controversial issue,” Barbara Roper, director of investor protection with the Consumer Federation of America, wrote in an e-mail.
“They were always going to have to make concessions to Republicans and the business-friendly Democrats who use bipartisanship as their cover to get legislation passed,” she wrote. “The question is going to be what message the Democrats take from the defeat.”
E-mail Sara Hansard at [email protected].
