Retail Investor Protection Act

Floor Speech

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

I strongly oppose H.R. 2374, the bill inappropriately entitled the Retail Investor Protection Act. Quite the opposite. H.R. 2374 hinders the Labor Department and the Securities and Exchange Commission from protecting the average retail investor when they save for retirement.

For the last 2 years, the Labor Department has been updating an outdated rule regarding the fiduciary responsibility owed to employee benefit plans under the Employee Retirement Income Security Act of 1974, ERISA, and for Individual Retirement Accounts, IRAs, under the Tax Code.

Today retirees are more likely to rely on 401(k)s than IRAs and are less likely to have defined benefit plans from their employers. At the same time, financial products have become increasingly complex. The cost of rules governing the rights of investors and the responsibilities of advisers are more than 35 years old. DOL is attempting to modernize these rules in order to reflect the changing nature of the retirement marketplace.

Given these realities, it is necessary for the Department to make sure that the professionals offering retirement advice have a duty to put their clients' interests first before their own or, at the very least, tell their customers that they may be conflicted.

At the same time, the SEC is considering moving forward on a rulemaking that would impose a uniform fiduciary standard of conduct for broker-dealers and investment advisers consistent with the Dodd-Frank Act. This would ensure that whatever the business model, if an individual is providing personalized investment advice about securities to a retail customer, they would have a duty to put that customer's interests before their own. This is particularly important as many retail customers are unaware of the differences in the standards of care that various professionals owe them.

Both agencies have been making progress with their rules, collecting the necessary data and responding to stakeholder concerns about preserving access to investment advice, particularly for individuals with small accounts.

Given these facts, H.R. 2374 is the wrong approach. This legislation makes it significantly more difficult for both the SEC and the Department to move forward.

First, the provision requiring the SEC to do a new study, another study documenting that investors are being systemically harmed or disadvantaged under the existing standard, creates a high hurdle for the Commission to overcome. The purpose of this provision is to impose further roadblocks before the Commission can take any action, providing another avenue for industry to sue the SEC.

Secondly, H.R. 2374 would prohibit the Labor Department from modernizing the fiduciary duty standard under ERISA and the Tax Code until the SEC issued their rule. This provision would represent a historic abrogation of the Department's unique authority, and in spite of whatever pressing need for an updated rule.

Finally, H.R. 2374 seems premised on the faulty notion that the Department and the SEC are not coordinating when, in fact, staff have regular ongoing SEC-DOL staff meetings; in addition, leadership meetings, as well as a memorandum of understanding to share information on retirement and investment matters.

On behalf of millions of consumers, retirees, and investors, several organizations, including the AARP, the Consumer Federation of America, the AFL-CIO, and Americans for Financial Reform all oppose this legislation. A coalition of financial planning professionals wrote that H.R. 2374 is a backdoor attempt to undermine investor protection provisions in Dodd-Frank. In addition, SEC Chair White said in a letter to the committee that H.R. 2374 would make it difficult for the Commission to adopt such a rule.

Simply put, H.R. 2374 just goes too far. The bill holds the Labor Department hostage while throwing out roadblocks for the SEC. Mr. Speaker, for these reasons, I urge a ``no'' vote on this bill.

I reserve the balance of my time.

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Ms. WATERS. I yield myself such time as I may consume.

Mr. Speaker and Members, H.R. 2374 is yet another attempt by Republicans to prevent our regulators from doing their job, this time protecting the average retail investor when they try to save for retirement.

Under this bill, the Securities and Exchange Commission would have to navigate new obstacles to harmonize the standard of care broker-dealers and investment advisers have when providing investment advice. The Department of Labor would have to wait possibly forever to update its rules protecting 401(k) and IRA plan participants.

H.R. 2374's restrictions put additional work in the way, stopping brokers from SEP dealing when selling investment products to Main Street.

Several studies have demonstrated that Americans do not understand that a broker does not necessarily have the investor's best interest when pushing financial products. The line between advisers and brokers has blurred over the last few decades, and this bill makes it harder to bring clarity for investments.

Mr. Speaker and Members, this administration has taken a strong stand against this bill. Let me read to you from the letter that they have sent to us, and I would like to offer this for the Record:

The administration strongly opposes passage of H.R. 2374 because it would derail important rulemakings under way at the Securities and Exchange Commission and the Department of Labor that are critical to protecting Americans' hard-earned savings and preserving their retirement security.

They further say:

H.R. 2374 prohibits Labor from issuing a rule to protect investors until the SEC engages in and completes further study of the effect of a rulemaking on retail investors.

Of course, there is a lot said here, but I think this says it all:

The bill would hinder efforts to protect consumers from conflicts of interest among brokers, dealers, financial advisers, and others whose incentives may be misaligned with investors, potentially leading to deceptive and abusive practices.

The administration is committed to ensuring that American workers and retirees are able to receive advice about how to invest their money in safe, secure, and transparent financial products that is free from harmful conflicts of interest.

Mr. Speaker and Members, I would just bring this to your attention: the Department of Labor is working to protect investors. My friends on the opposite side of the aisle are working to protect broker-dealers who may not have the best interest of these small individuals who want to invest, who want to earn money for retirement.

My friends on the opposite side of the aisle are putting all of this energy out to protect them no matter if they may be in a conflict of interest with those who are simply trying to save for retirement.

I have watched as we have been through the subprime meltdown in this country. People lose money in their 401(k)s. I have watched people lose money in their IRAs. I have watched single women in their 60s losing their entire investment retirement savings who can't go back to work because they are too old--they can't find a job.

Whose side are we on? Are we on the side of broker-dealers who will have no fiduciary responsibility, who can tell you any old thing, direct you any old place? They get higher commissions and the people lose money. Whose side are we on? Why are we here in the Congress of the United States of America, voted on by our constituents to come here to advocate for their best interest?

The gentlelady from Missouri talked about what a hard time families are having. She is right. Families are having a hard time. I want to tell you, families are having a hard time even when my friends on the opposite side of the aisle would deny them food stamps when they lose their jobs, even when they stand here in the Congress of the United States and support sequestration that denied that family the ability to send their child to Head Start. They don't have money for fancy early childhood education. Head Start is all they have, but they are losing the ability to do that because my friends on the opposite side of the aisle support cutting back every agency.

My friends on the opposite side of the aisle can't care about families in the way that they say they do because they shut down this government and they caused families to lose money to stay at home, to not know when they were going to get paid, or how to pay their bills. Not only did they harm these families; they harmed many of our agencies that are trying to help the families. I could go on and on and on.

But let me say that consumer protection is advocated by some organizations we are all familiar with: AARP, AAUW, AFL-CIO, AFSCME, Alliance for Retired Americans, Americans for Financial Reform, the Association of BellTell Retirees, on and on and on. These are the people who protect consumers.

I will submit this for the Record.

I yield back the balance of my time.

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