Retail Investor Protection Act

Floor Speech

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Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself such time as I may consume.

Mr. Speaker, H.R. 1090 would halt the Department of Labor's ongoing efforts to protect American retirement savers from investment advice that conflicts with their best interests.

The bill would prohibit the Department from promulgating any rule on the issue until 60 days after the Securities and Exchange Commission finalizes its own fiduciary rule for investment advisers and broker dealers.

The bill would then delay the SEC's long overdue rulemaking by requiring the Commission to first report to Congress a separate economic analysis that, among other things, considers how a new standard would affect a broker's profit.

These delays are unacceptable and ignore the real issue that the Department is trying to address: conflicted retirement investment advice that costs our Nation's workers and retirees an estimated $17 billion a year.

The Department's rulemaking would do so by requiring persons providing retirement advice to put the interests of their clients ahead of their own and abide by a fiduciary duty, the same duty that we expect from our doctors, lawyers, and trustees.

Simply put, a financial adviser should not be paid more for recommending one product over another, but should abide by a fiduciary standard of care. Would you be comfortable if your doctor was paid more for an office visit for recommending one drug over another or for a lawyer to be paid more for interpreting the law one way or the other? No, of course not. Yet, we allow these same conflicts to exist with those that are providing millions of hardworking Americans with advice on their retirement savings.

These conflicts encourage investors to, for example, push a 70-year-old retiree to invest more of her savings in a stock fund rather than a less risky short-term bond fund simply because the adviser receives 150 percent more for making the riskier recommendation.

Such a commonsense update in the law to address these conflicts is long overdue and, indeed, at the Department, is over 5 years in the making. During that time, the Department has published an initial 2010 proposal, solicited feedback, held public hearings on that proposal, and issued even a reproposal this past spring.

Since that reproposal was published, the public and interested stakeholders have had 164 days of public comment, 4 full days of multi-panel public hearings, and ample opportunity to meet with the Department, which held over 100 meetings with interested stakeholders, not including meetings with Members of Congress.

Thanks to the Department's diligence and willingness to listen to stakeholder concerns, the proposal now enjoys broad support, including support from 95 financial services groups, public interest, civil rights, and consumer organizations, labor unions, and many investment advisers who are already providing advice to savers under a fiduciary standard. These groups range from the AARP, Public Citizen, the Consumer Federation of America, to the Financial Planning Coalition, among many others.

All this points to the Department's tangible efforts to take a balanced, measured approach to developing a rule that works. I fully support their efforts to continue to work towards its completion not only because it is necessary, but because it just makes common sense.

What is more, the need to update the law quickly is urgent. Hardworking Americans lose an estimated $17 billion per year--or $47 million per day--to conflicted retirement investment advice.

While we should clearly encourage the Securities and Exchange Commission to also update its own rules on investment advice over securities, we should not make retirement savers wait any longer for protection by hinging the DOL's rulemaking to the SEC's, as H.R. 1090 would do.

Mr. Speaker, I support the Labor Department's efforts to finalize a rule and urge my colleagues to vote ``no'' on H.R. 1090.

Mr. Speaker, I reserve the balance of my time.

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Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such time as I may consume.

I think it is important for me to correct the Record about the U.K. investment advice experience. In predicting the worst outcome from the Department of Labor's rulemaking, my Republican colleagues frequently cite the United Kingdom. They argue small investors will lose access to their investment advice.

Let me set the record straight. According to outside consultants for the U.K. Financial Conduct Authority: Eliminating commissions has reduced investment bias and has contributed to an improvement in the quality of advice.

There is now more competitive pressure and lower product costs, and far from having an advice gap, there is excess capacity of about 5,000 advisers in the U.K. market today according to an analysis by Towers Watson. There is no evidence that consumers have been forced to go without advice as a result of the regulation.

I fear that we are comparing apples to oranges. That is because--unlike the U.K. regulation--the DOL proposal is a modest update that does not ban commissions. Rather, the proposal seeks to simply ensure that persons providing retirement investment advice put the interests of their clients ahead of their own.

This debate touches on a fundamental disagreement we continue to have in our respective parties. On the one hand, Democrats are acting on the belief that government should be the guardian of the interests of the people. It is a belief grounded in a fundamental truth: that our economy thrives with a rapidly growing and diverse middle class. For the middle class to grow, the American public must have confidence in our markets and be protected from bad actors.

On the other hand, Republicans continue to act to protect the interests of a free market, driven by profit, even if it comes at the expense of the retirement savings of hardworking Americans. But we have seen the impact of the Republican free market on our economy, most recently in 2008, when the big banks on Wall Street, left to their own devices, caused the worst economic collapse in a generation, one that destroyed nearly $16 trillion in household wealth and 9 million jobs, displaced 11 million Americans from their homes, and doubled the unemployment rate.

And yet my colleagues insist on advancing measures like H.R. 1090, which would encourage the continued exploitation of American workers and retirees on behalf of some financial advisers who put their own interests in profits first.

The current rules governing the provision of retirement investment advice allow conflicts that harm everyday Americans working hard to ensure that they can retire with dignity. Every moment we delay in updating those rules, unscrupulous advisers benefit $1.4 billion a month at the expense of those everyday Americans.

With such large industry profits at stake, this issue will continue to be a prime target for the Republican majority. But I encourage my colleagues to resist those who are more interested in lining their pockets than protecting the interests of American retirees and workers.

I urge my colleagues to join me in voting ``no'' on H.R. 1090.

Mr. Speaker, I yield back the balance of my time.

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