The controversial “Retail Investor Protection Act, recently introduced by Rep. Ann Wagner (R-MO), is gaining opposition from coalitions set on protecting investor interests.

Supporters both in the U.S. House and in the financial services community tout the Bill as a way to provide lower-income Americans saving for retirement the availability of financial products and advice at a low cost. However, The Pension Rights Center, along with the AARP, AFL-CIO, Americans for Financial Reform, Consumer Federation of America and Demos have signed a letter urging Congress to abandon the bill all together.

“I think it could be called the Retail Investor ‘Jeopardization’ Act,” says Karen Friedman, Executive Vice-President and Policy Director with the Pension Rights Center in Washington.

“What Congress is doing is intervening in the regulatory process first [by] trying to put up roadblocks so the SEC can’t update the fiduciary standards that apply to brokers…then the bill says the Department of Labor can’t do anything to update the fiduciary standards under ERISA until the Securities and Exchange Commission acts, which is like saying we’re going to put up roadblocks so nobody can act,” she explains.

Both the DOL and SEC have very different approaches to investor protection. The SEC is currently thinking about extending fiduciary conduct standards to broker-dealers who provide investment advice to both retirement and non-retirement clients. The DOL’s approach, however, would extend different fiduciary obligations to anyone who gives advice to IRAs (such as banks, insurance companies, registered investment advisers and broker-dealers). The proposal expressed by the DOL would not require a change in the standard of conduct toward clients – distinguishing it from the SEC’s proposal. 

“The basic line on this is that the people giving investment advice should be doing so in the best interests of retirees and not to line their own pockets,” adds Friedman.

Among the many issues, the letter the PRC sent to Congress states:

“First, HR 2374 places numerous new analytical and ‘cost-benefits’ requirements on the SEC that would require extensive additional work before the agency could issue a rule. This is despite the fact that the SEC is currently collecting data to support an economic analysis before any   rulemaking is undertaken. Furthermore, the current   analysis follows over a decade of study of this issue, and a major report already released by the SEC that summarized   the results of numerous studies in this area.”

In a statement, National Association of Insurance and Financial Advisors President Robert Miller says, “NAIFA has long said that the Department needs to be wary of imposing an overly rigid fiduciary rule with unintended consequences that would raise costs and reduce access to advice for millions of middle class retirement savers.”

Friedman hopes the proposal will fail to in support from the full House when it soon reaches a floor vote. “It’s an absolutely bogus Bill, there is nothing of merit in it and should be defeated,” she says.

Joel Kranc is Director of Kranc Communications, focusing on business communications, content delivery and marketing strategies. He has written and worked in the retirement and institutional investment space for 17 years covering North American markets, large institutional pensions and the adviser community.


Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access