Retail Investor Protection Act

Floor Speech

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Mr. Speaker, I yield myself as much time as I may consume.

Mr. Speaker, at a time that the American people demand and deserve that Democrats and Republicans work together to fix real problems in our Nation, today this body has the opportunity to do just that.

Today the House will consider H.R. 2374, the Retail Investor Protection Act. The bill has strong support from both Democrats and Republicans. In fact, it passed the Financial Services Committee earlier this year on a strong bipartisan recorded vote, including half--half--of our committee's Democrats.

H.R. 2374 will ensure that hardworking families and individuals throughout our country who are trying to save for their retirements, save for their children's college education, saving for their first home are not harmed by confusing, costly regulations coming out of Washington.

Mr. Speaker, all Americans know that a flood of Washington red tape has hurt our economy. That is why tens of millions of our fellow countrymen remain either unemployed or underemployed. Unfortunately, even more regulations are on the way.

Specifically, today, Mr. Speaker, we are here speaking about the Securities Exchange Commission and the Department of Labor, which are headed toward proposing two massive and inconsistent rulemakings that are going to hurt the ability of retail investors to get financial advice that they need for their portion of the American Dream.

Mr. Speaker, retail investors are not big-time professionals on Wall Street. Retail investors had no role in causing the financial crisis, and they should not be punished for it which, regrettably, this rulemaking could do.

Rather, retail investors are ordinary, hardworking citizens from all of our congressional districts who buy and sell securities for themselves, their families and their futures, not for a company.

And in this struggling economy, when people who need help most, what are the SEC and the Department of Labor planning to do? They are planning to make it harder and more expensive for these Americans to get the financial advice that they both want and need.

Perhaps even more incredibly, the SEC, the Securities and Exchange Commission, is moving forward with this new regulation even though the agency has failed to provide any evidence that it would better protect investors.

So the Securities and Exchange Commission apparently is going to regulate first, ask questions later. This makes no sense for millions of struggling Americans trying to save for the future.

Mr. Speaker, again, we know that millions of middle class families are sitting around their kitchen tables struggling to save and invest in order to make ends meet. Every day, millions of them turn to financial professionals for advice.

Yet here comes from Washington regulations that will make that advice either unavailable or unaffordable, so fewer Americans will get the advice they need. That is unfair.

Let me provide you just a couple of examples, Mr. Speaker. Under the current suitability standard, an investor can have an account with a low-cost, online broker with whom he or she can both make trades and get investment advice.

Due to technological advances and the relatively low costs associated with operating an online platform, these brokers can offer trades and investment advice for as little as $7.

But should a fiduciary standard be applied to these online brokers, the impact on investors could be one or all of the following: higher fees per trade, higher fees for investment advice, or brokers may simply stop providing this investment advice to less affluent customers altogether. That is not fair.

Take the example of the single mother who supports her mother and wants to save for her daughter's college education. She has finally saved enough money to open up an IRA with $2,000 in savings.

But we know that should these rules continue to be promulgated, with these new Washington regulations, well, this lady may just be told she now needs $25,000 in order to open up the very same account.

Again, Mr. Speaker, patently unfair.

How about a middle-aged father who works with a financial professional. He wants the professional to get him access to products and ideas, instead of managing his investment portfolio for him. He wants to trade individual bonds, but potential regulations might not allow the financial professional to offer him bonds on a principal basis.

So the result? The father either gets worse execution prices or ends up paying a whole lot more for his investments.

Fortunately, one of our colleagues has stepped up to the table. The gentlelady from Missouri (Mrs. Wagner) has introduced a commonsense bill, the Retail Investor Protection Act, and I and the rest of the committee who have voted for it congratulate her for her great work.

This bill would require the SEC to first consider the potential impacts its proposed regulation will have on investors, especially those with low and moderate incomes who would lose access to personalized investment advice that they need.

Second, the bill would require coordination between the SEC and the Department of Labor. These Washington agencies will have to sequence their rulemakings, with the SEC going first, so there will be no inconsistent rules that end up confusing and costing investors.

The Retail Investor Protection Act that we are debating today will avoid regulatory conflict between the SEC and the Department of Labor. It is as simple as that.

Mr. Speaker, even the SEC itself acknowledges that the cost of its regulation could ultimately be passed on to retail investors in the form of higher fees or lost access to services and products--yet, again, unfair.

It is not what Americans need. It is not what they deserve, especially as our economy remains in the throes of the weakest, slowest nonrecovery of the last 70 years.

Mr. Speaker, I urge my colleagues to pass this bipartisan bill, again, a bipartisan bill that passed with half of the Democrats on the Financial Service Committee choosing to support this commonsense legislation. H.R. 2374 will help struggling American families get the financial assistance they want and deserve.

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

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I yield myself such time as I may consume.

Mr. Speaker, I must admit in the time that I have served as a Member of Congress, I have noticed the more shrill the debate the less defensible the position. As I have listened closely to what appears to be a very shrill debate, it certainly buttresses that position.

I hear my friends talk about us on the other side of the aisle. I have heard the phrase ``my friends on the other side of the aisle'' consistently. But I would say perhaps the debate has to be between my friends on that side of the aisle, since the ranking member well knows that half--half--of her caucus on the Financial Services Committee supported this bill by the gentlelady of Missouri. As was pointed out earlier, it is not only bipartisan; it is also bicameral.

I am sitting here, Mr. Speaker, with a letter signed by no fewer than 10--10 Democratic Senators imploring that the very same provisions of the Wagner bill be enforced: Jon Tester, Mark Warner, Claire McCaskill, Kay Hagan, and the list goes on and on. I would say to my friends on that side of the aisle, perhaps they ought to finish the debate amongst themselves before they carry it on over here.

Then, again, we all know that people are entitled to their own opinions; they are not entitled to their own facts. There have been a number of misstatements of facts from my friends on that side of the aisle, particularly that broker-dealers have no standard whatsoever in disclosing conflicts of interest; but that is not true. Within the antifraud provisions, sections 9, 10, 15(c)(1) and (2), it prohibits misstatements, misleading omissions of material facts; and, indeed, broker-dealers must fully disclose any conflicts of interest, yet another huge section of debate that was totally misleading and false by friends on that side of the aisle.

And I must admit, it is a very disappointing debate; but, it is in some respects illuminating to see the cynical position of those who simply believe that everyone appears to be a crook unless you are a government worker. The phrase ``cancer of self-interest'' is working mothers have a self-interest to invest in their children's education. If the guy at the Pepsi bottling plant that I represent is trying to invest so he can buy a home and put a roof over his family's head, that is the cancer of self-interest?

All we are trying to do here is preserve investment advice and investment opportunities for working Americans, and I would encourage all Members, all Members of this body, to vote for the Wagner bill.

I yield back the balance of my time.

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

Again, I urge opposition to this amendment which would absolutely eviscerate this bill that we are considering now from the gentlelady from Missouri.

Number one, we have speaker after speaker who come up and seem to ignore the fact that broker-dealers already are subject to a suitability standard, including antifraud provisions that prohibit misstatements, misleading omissions of material facts, and fraudulent and manipulative acts and practices in connection with the purchase and sale of securities. They have a duty of fair dealing, which include the duty to execute orders promptly, disclose certain material information that the customer would consider important as an investor, charge prices reasonably related to the prevailing market, and fully disclose any conflict of interest.

I could go on and on.

The proponents of this amendment, as speakers before them, seemed to ignore this set of facts. And so again, it is interesting to me how the American people are demanding that their Congress work on a bipartisan basis; and so out of our committee, the Financial Services Committee, we have gone above and beyond the call of duty, and now we have a bill that has been supported by half of the Democratic members of the Financial Services Committee. And I just read a letter where 10 Democratic U.S. Senators are urging the exact same language as the Wagner bill and, thus, oppose the Miller amendment.

So, again, Mr. Speaker, I urge the proponent of the amendment to first have the debate with his own Caucus, and then we can have a fuller, richer debate on the floor.

What is really happening here is that all we are doing is saying to the Securities and Exchange Commission and the Department of Labor that this is an economy that is being crushed--crushed--by a red tape burden, that at least justify it. Make sure that the person you claimed you are going to protect, that you actually protect; and instead, we, quite honestly, fear they will not be protected, that instead they will be harmed, that all of a sudden, people who have access to $7 trades won't have access to them.

Now, again, for the affluent, that is no big deal, but for working mothers struggling to make ends meet, it is a very big deal.

To be denied the opportunity to open up an IRA with $2,000? No, I think now Congress has deigned that the Department of Labor can institute a fiduciary standard, and now you are going to need $25,000. Well, what the heck, let's make it $50,000. And so the very people they claim they want to protect very well could be harmed by this standard.

We understand the talk, but where is the proof? Where is the proof? Because what is going to happen if this fiduciary standard is imposed? All of a sudden investment advice that working Americans count on is either going to disappear or become far more expensive.

So, again, maybe it helps the trial lawyer; maybe it helps the labor union bosses; but it doesn't help the working mothers. It doesn't help the struggling fathers. It doesn't help low- and moderate-income people struggling in this economy where tens of millions remain underemployed and unemployed under this administration's economic policies, and so I urge that we reject this amendment.

I reserve the balance of my time.

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

I think the audio system on the House floor is working quite well, and so I continue to be somewhat amazed by the number of speakers who get up and claim that broker-dealers can engage in conflicts of interest.

Again, I will give the citation for the duty to disclose conflicts of interest, FINRA's Suitability Rule 2111. I would encourage those who haven't read it to actually read it so that we can actually have facts on the House floor.

Mr. Speaker, what is truly radical here is the proponents of this amendment trying to upset 80 years of settled law, without any evidence that is compelling, to somehow believe that all of a sudden we are going to help a universe of people, who most of us believe, including half of the Democrats on the

Financial Services Committee, instead will be hurt, including a number of prominent Democratic senators who believe they will be hurt, these working moms and pops trying to provide for their family, trying to manage their nest eggs, having a new standard forced upon people they rely on. So all of a sudden, that investment advice is either going to get more expensive, it is going to disappear. All of a sudden, IRAs for working moms at prices they can afford will disappear all because we hear rhetoric about Wall Street.

Well, I don't think I have had any letters of endorsement from anybody on Wall Street. We can talk about something else that is not applicable. Perhaps we can talk about ObamaCare. I am always happy to have that discussion once again.

Again, this is a bipartisan bill. All we are trying to do is ensure, if 80 years of settled law that has helped working families is about to be upset, then we better have proof it is going to help the people that it claims to help. The amendment from the gentleman from California would totally eviscerate that.

I urge opposition, and I yield back the balance of my time.

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