Bill Puts SEC at Head of Fiduciary Definition Line

The Retail Investor Protection Act (H.R. 2374) was introduced by Rep. Ann Wagner (R-Missouri) and passed 44-13. It addresses the permissive rulemaking authority provided to the Securities and Exchange Commission (SEC) in the Dodd-Frank Act regarding standards of care applicable to broker/dealers and investment advisers.

The bill, in effect, draws a line and puts the SEC at the head of it, allowing the commission to propose its definition of fiduciary, and stopping the DOL from any rulemaking on a fiduciary definition under ERISA until 60 days after the SEC’s definition. Dodd-Frank authorizes the SEC to set rules on fiduciary standards of conduct, extending them to broker/dealers.

The DOL’s efforts to amend the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) could conflict with the SEC’s permissive mandate under section XIX of Dodd-Frank, according to Rep. Jeb Hensarling (R-Texas), chairman of the Financial Services Committee.  “Ultimately, we believe this could hurt moderate-income Americans as they attempt to access financial advice, constrain their investment advices, and ultimately cost them money,” Hensarling said at the full committee’s markup.

A number of industry groups weighed in on the subject early this month. (See “Groups Urge SEC to Uphold Fiduciary Standard.”) Rep. Maxine Waters (D-California) tried unsuccessfully to have a bill she proposed earlier attached to the bill as an amendment. The bill would have assessed user fees to fund exams for advisers. (See “Rep. Waters Introduces Bill to Boost Exams.”)