As the Obama administration moves forward with its fiduciary reproposal, a trade organization has published a white paper taking issue with the rationale for making those changes.
The Securities Industry and Financial Markets Association (SIFMA) last week released a white paper pushing back on a report from the president's Council of Economic Advisers expressing support for the regulation, saying the CEA study ignores the ways in which financial advisors are already regulated, including at the state level, and underestimates the market forces that already make giving conflicted advice a bad business decision. In addition, the SIFMA paper, drafted by the Morgan Lewis law firm, says that current regulations adequately protect an investor’s right to choose their advisor — something that would be taken away by the revised fiduciary standard. The paper also challenges the CEA's claims that, among other things, a new fiduciary rule on advisors would prevent “conflicted advice” that costs Americans up to $17 billion a year.
“Broker-dealers, investment advisers, banks, and other institutions that provide investment advice to investors operate within a comprehensive regulatory framework established and overseen by various federal and state agencies and self-regulatory organizations,” the Morgan Lewis paper asserts. “Existing regulation balances investor choice and investor protections in a manner that protects the investor’s ability to choose the financial professional that he or she wants to work with, and the level (and costs) of the services provided.”
According to Investment News, SIFMA president Kenneth Bentsen, Jr. said that, while his organization isn’t yet planning a lawsuit to stop the rule, their pushback lays the groundwork for a legal strategy against the regulation in the future.
Lawmakers on Capitol Hill have already expressed concern about the fiduciary reproposal, and the rationale for imposing it. The potential implications of the proposal were a key discussion topic at the recent NAPA 401(k) Summit.
The Department of Labor has previously said it will release the proposal for public comment after the Office of Management and Budget signs off on the language, as is expected. That is likely to happen later this spring, with an anticipated 90-day comment period following thereafter. The fiduciary standard regulation was originally proposed in 2010, but was pulled during the comment period after attracting significant opposition from the financial services industry.
