[Congressional Record Volume 147, Number 158 (Thursday, November 15, 2001)]
[House]
[Pages H8210-H8213]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PERMISSION TO POSTPONE FURTHER CONSIDERATION OF H.R. 2269
Mr. FLETCHER. Mr. Speaker, I ask unanimous consent that during
consideration of H.R. 2269 pursuant to House Resolution 288,
notwithstanding the operation of the previous question, the Chair may
postpone further consideration of the bill to a time designated by the
Speaker on this legislative day.
The SPEAKER pro tempore (Mr. LaHood). Is there objection to the
request of the gentleman from Kentucky?
There was no objection.
Mr. FLETCHER. Mr. Speaker, I yield 3 minutes to the gentleman from
Texas (Mr. Sam Johnson).
(Mr. SAM JOHNSON of Texas asked and was given permission to revise
and extend his remarks.)
Mr. SAM JOHNSON of Texas. Mr. Speaker, we talk about two advisors. I
do not know how we keep both of them from being bad. As I mentioned,
our measure removes the obstacles for employers to provide millions of
workers professional investment advice.
The bill requires financial service providers to fully disclose their
fees and any potential conflicts. In this bill's current form, we
protect people from fly-by-night groups and scam artists looking to
make a fast buck.
There are a number of safeguards that will protect workers and ensure
that they receive investment advice on their 401(k) plans that is in
their best interest. The pension fund managers at corporations and
unions who make decisions about their defined benefit funds have access
to professional portfolio managers. Now this bill will give rank and
file the same protections.
The Democrat substitute will not help people. It will just add layers
of bureaucracy and could prevent people from seeking advice. People
value their
[[Page H8211]]
time, and they do not have time to seek and sift through paperwork and
bureaucracy and two advisors. Importantly, our bill retains critical
safeguards and includes new protections to guarantee that people
receive sound investment advice. Since employees will work with a plan
fiduciary advisor, people will be protected by State law, Federal law,
as well as the SEC. People value their time, and they do not have time
to sift through a whole bunch of new regulations. That is just wrong.
Mr. Speaker, I urge my colleagues to reject the Democrat substitute
and pass H.R. 2269 the way it is.
Mr. ANDREWS. Mr. Speaker, I yield 3 minutes to the gentlewoman from
California (Ms. Woolsey).
(Ms. WOOLSEY asked and was given permission to revise and extend her
remarks.)
Ms. WOOLSEY. Mr. Speaker, as I said earlier, H.R. 2269 is a prime
example of how a good idea can become a bad bill. Is it a good idea to
make investment advice available to employees at the work site? Of
course it is. But it is a bad idea to allow self-interested advisors,
those who could benefit from the advice given, into the workplace. That
is exactly what H.R. 2269 does.
Currently ERISA prohibits investment advisors from coming to a
workplace to provide employees with investment advice if there is any
reason to think that the advisor might benefit from recommending one
investment over another. We must remember that ERISA was enacted to
protect workers from abuses related to their benefits.
With H.R. 2269, we will allow investment sales folks onto the work
premises under the guise of the employers' endorsement without
protecting the workers significantly, or at least enough to make sure
that they are in good hands when they have heard the advice.
Fortunately, we have an alternative to H.R. 2269, and that is the
Andrews substitute. We do not need to wait for employees to be bilked
by some scam artist to make H.R. 2269. We can pass the Andrews
amendment and then we have a good bill.
The Andrews substitute starts with the same good idea of bringing
investment advisors to the workplace, but the Andrews substitute
includes strict standards to protect employees from receiving tainted
advice. The Andrews substitute requires meaningful disclosure of the
advisors' affiliations in a way that is easily understandable to all
employees, and it allows employees to meet with an independent advisor
if there is a conflict of interest.
The Andrews substitute keeps the good idea of making investment
advice available to employees at the workplace, but it builds on the
protections in current laws that employees need and must depend on. The
Andrews substitute is a win-win for employees, and I urge my colleagues
to support it as the correct and safe way to provide investment advice
at the workplace.
Mr. FLETCHER. Mr. Speaker, I yield 3 minutes to the gentleman from
North Carolina (Mr. Ballenger).
Mr. BALLENGER. Mr. Speaker, as an employer with employees who have
401(k) plans back home, I am pleased that the House is voting on a bill
to ensure professional investment advice for rank-and-file workers and
their individual needs.
I urge my colleagues to reject the Andrews-Rangel substitute which
would, in fact, reduce the number of employers and financial advisors
willing to offer their advice to employees. This is just the opposite
of what the worker needs at a time when they are nervous about their
retirement assets. It is just more government regulation.
The substitute is bad because it increases the cost for advisory
services by requiring two fiduciary advisors as options. It undermines
the current ERISA remedies, and erodes the preemption statute, and adds
more Federal regulation in areas already regulated by Federal and State
entities, areas in which the Department of Labor has no expertise. And
it reverses the burden of proof in lawsuits against employers and
financial advisors which surely will attract our friends, the trial
lawyers. It will reduce the number of employers that are willing to
have a 401(k) plan.
Mr. Speaker, it is important that my colleagues support the
bipartisan Boehner bill endorsed by Labor, Commerce, Department of
Treasury, along with the National Association of Manufacturers and the
National Rural Electric Coop. These groups speak for a great many of
the employers and employees in my district, and I support the Boehner
bill as a much-needed update of the current law.
This bill gives protection and access to today's employees who seek
investment advice to maximize their retirement savings. The primary
focus of this act is to give participants advice solely in their best
interest. The bill achieves this by including strict disclosure
requirements, with sanctions, to inform plan participants about any
potential fees or conflicts of interest in what average investors have
today.
Most important, workers will have full control over their investment
decisions. I urge the House to reject the substitute amendment and pass
the Boehner bill today.
Mr. ANDREWS. Mr. Speaker, I reserve the balance of my time.
Mr. FLETCHER. Mr. Speaker, I yield such time as he may consume to the
gentleman from Georgia (Mr. Isakson).
Mr. ISAKSON. Mr. Speaker, the intentions of the gentleman from New
Jersey (Mr. Andrews) in the substitute are as noble as the intentions
of the authors of the underlying bill, but I happen to favor the
underlying bill for a couple of reasons that, hopefully, Members will
listen closely to.
To be against the underlying bill and for the substitute, Members
have to presume we cannot trust employees or IRA-SEP beneficiaries,
independent contractors, to have information and then make a decision.
Secondly, and most importantly, Members need to understand that most
Americans today, unlike 25 years ago, are going to need to depend on
401(k)s, IRA-SEPs or other self-directed plans for their retirement. I
ran as a trustee of a 401(k) plan for my company for 22 years, offered
an IRA-SEP plan for the 800 contractors we had.
I understand the firewall that prohibits the employer from giving any
advice and the limited amount of advice that becomes accessible to
either IRA-SEP or 401(k) beneficiaries.
It is wrong to presume that an employer would intentionally,
willfully or wantfully allow bad advice to come to their employees. To
the contrary, it is the security blanket which binds those people to
the company. In this time when we are needing the best information
possible, we should trust our employees to be able to allow access for
their employees and independent contractors to credible, competent
financial advice.
In the substitute, Members trust the Department of Labor to determine
who can give the right advice. In the underlying bill, Members trust
the employer, whose most valued asset is their employees, to be able to
offer credible advice through advisors to their employees and
independent contractors.
Mr. Speaker, I urge Members to adopt the underlying bill and reject
the substitute.
Mr. FLETCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Indiana (Mr. Souder).
(Mr. SOUDER asked and was given permission to revise and extend his
remarks.)
Mr. SOUDER. Mr. Speaker, I rise in opposition to the motion to
recommit of the gentleman from New Jersey (Mr. Andrews). I understand
some of his concerns and share some of the gentleman's concerns, but I
wanted to speak because overall this is a very strong bill. It is one
that we need to pass.
I believe that some of the comments that have been made here in this
debate have been inappropriate and indeed anticapitalist and
antibusiness. To argue that workers should not get financial advice or
to argue that businesses are somehow going to trick their employees or
bring in charlatans is in many ways beyond the pale of debate here in
Congress.
Quite frankly, some advice may be bad; but much of the advice out in
the financial world is bad right now. Employees, at present, can go to
the Internet and get all sorts of mail at home that has no anchor. No
employer is completely infallible. No employer can bring in somebody
who is going to give perfect advice that everybody is going to get rich
from.
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But I would say that most employers in America are not like Samuel
Insull from the 1900s. Give me a break.
[[Page H8212]]
Most employers know that if they brought in somebody with a conflict
of interest, that would be out there and informed at their plant
immediately. If they had somebody who was a charlatan ripping off, you
would have all sorts of contract negotiation problems, not to mention
that if it is a smaller company that is not unionized, the people
probably have their kids go to school in the same place, they eat in
the same restaurants, they live in the same town. To imply that
employers are somehow likely to want to rip off their employees or give
them bad advice at a time when this would be a way to help them and
improve their relations with their own workforce is absurd.
The problem is that our law is arcane. It has been out of date for a
number of years. As more and more employees in America have
flexibility, they need to have the same advice that the management is
getting, that the business leaders are getting and we should not
discriminate against employees.
Mr. ANDREWS. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman
from Tennessee (Mr. Ford).
Mr. FORD. Mr. Speaker, I am a little disappointed that we are
actually in the midst of having this debate today before actually
completing work on an aviation security bill and before completing work
on a stimulus package for people all across this great Nation.
Hopefully, the encouraging news we have heard today about progress
being made on that bill will not only give assurance or perhaps provide
a vehicle for us to pass something before we leave here but provide the
American people with some comfort as they prepare to travel on the
busiest holiday of the year.
I rise today, Mr. Speaker, with a lot of disappointment about the
package that has come before the House and with great concern. I rise
to support the gentleman from New Jersey (Mr. Andrews), who has worked
so tirelessly with Members on both sides of the aisle to find some sort
of agreement acceptable, one that would balance the needs of advisors
with investors. I might add that the Andrews substitute achieves the
twin goals of investor education and choice far better than the base
bill. The substitute offered by the gentleman from New Jersey presents
the best opportunity, particularly in my eyes and I am sure many even
on the other side, to achieve these goals.
First, the Andrews substitute would ensure that individuals were
aware of all potential conflicts by requiring that the disclosure be
contemporaneous with each occasion on which advice is rendered,
something all of us should be for. Although most advisors would act
professionally and be up front, as we would say, this provision would
prevent an unscrupulous firm from burying one line of disclosure boiler
plate in a 10-page document filled with legalese.
Second, the substitute would ensure that the advice is provided by
qualified, licensed and regulated professionals. This provision would
simply ensure that the advice is at least as good as they promised it
to be. I have heard my friends on the other side talk about this, and
why we do not guarantee this and mandate this is beyond me.
Finally, as the gentleman from New Jersey said so well in his opening
statement, the substitute empowers consumers to make a choice should
they determine that a potential conflict necessitates declining that
advice, meaning, as the gentleman from New Jersey said, that the
advisor would have to consent to providing the investor a different
advisor if he or she so chose.
Any Member with misgivings about the scope of this bill should
carefully consider the serious implications uncovered in a series of
hearings held this past year. I would urge a ``yes'' vote on the
substitute. I have not made my mind up on final passage, but I would
certainly urge a ``yes'' vote on the Andrews substitute.
Mr. ANDREWS. Mr. Speaker, I yield myself such time as I may consume.
The arguments we have heard against the substitute that the gentleman
from New York (Mr. Rangel) and I have put forward essentially boil down
to two arguments: one is that employers would get sued if the
substitute were adopted; and the second is that investment advice would
be too expensive for investment advice firms to give if the substitute
were adopted. Each of these arguments is incorrect.
Liability protection provisions in this substitute are essentially
identical for employers as those that are in the base bill. If an
employer does not engage in any independent act of negligence or
illegality, the employer is not liable under the substitute, as is the
case in the base bill. In fact, the substitute adds provisions, adds
protections to employers which do not exist under present law to
provide a safe harbor for employers who hire investment advisors. So
the argument that this somehow is going to unleash a flood of
litigation against employers is reminiscent of the similar false point
made under the patients' bill of rights debate and it is equally wrong.
The second argument that somehow or another the expense that is going
to be imposed upon advisor firms is going to preclude them from giving
advice is equally wrong. It is not very expensive to tell an employee
that there is somewhere else he or she can go to get advice. It took me
about 4 seconds to say it. It would not take much longer for the
advisor to say it, either. It is not very expensive to say to an
investor that before you put your money in this fund, you ought to know
that I as your advisor make more money if you put the money in the fund
than if you do not. It took me about 4 seconds to say it, and it would
take about 4 seconds for the advisor to say it as well. The additional
cost that would be imposed upon investment advice firms I am sure would
be gladly borne by those firms in order to win the commissions which
they rightfully earn by giving the advice in the first place.
Our substitute, I believe, covers the key grounds. It says that a
conflicted advisor must give full, timely and understandable
disclosure. It says that every person giving advice, not most people
giving advice but every person giving advice must be duly qualified and
accountable to lose his or her license if they breach their fiduciary
duty.
It says that every person receiving advice from a conflicted advisor
must know that there are other choices to whom the person can turn that
are not conflicted. And it says that if a fiduciary duty is breached,
if bad advice is given and a pensioner or worker suffers, there is
somewhere to go to be made whole, not to get back most of what you lost
or some of what you lost but to get back all of what you lost if your
advisor has broken the law.
Our substitute deserves the support of Members on both sides of the
aisle. We respectfully ask its adoption.
Mr. Speaker, I yield back the balance of my time.
Mr. FLETCHER. Mr. Speaker, I yield myself such time as I may consume.
As we come to the close of this debate on the substitute, certainly
we appreciate the work of the gentleman from New Jersey and the, I
think, attempt to certainly make sure that we protect workers as they
get advice on their investments.
As we have seen over the last number of years, and as I recall owning
a business and providing retirement plans for my employees, there has
been a substantial shift from what we call defined benefits to defined
contributions, to the 401(k)s and 403(b)s and other such accounts. It
becomes imperative with that shift that we allow advice to be made to
the employees and that we do it in such a way where it is efficient,
where it does not drive up the administrative cost, and where the
employees can be assured that there is the appropriate accountability.
The gentleman from Ohio (Mr. Boehner), the chairman of this
committee, has worked for over 6 years; and I think he has put together
an excellent, balanced bill which meets those requirements. It
certainly provides an ability for employers to continue to offer good
retirement plans of the defined contribution sort. It also provides the
ability for them to offer advice so that their employees can make the
best investment and have the most money when they retire at the end of
their work livelihood. It additionally provides for great
accountability. There is a disclosure that must be made if there are
conflicts of interest.
I think the difference we see between these two bills is the balance,
of how
[[Page H8213]]
much are we going to go toward trying to, what I would say build a box
that is padded so no one gets themselves bruised. In a world where we
have freedom here, people are going to make mistakes. That is part of
what freedom is about. How much are we going to restrict that freedom
in order to try to make sure that we protect individuals? There needs
to be a balance that is struck, and I think the substitute goes too
far. It does not allow the freedom that will encourage businesses to
offer the kind of advice that is needed. It will restrict in the long
run the ability, and there are differences in the liability sections,
there are some very vague portions here where the liability not only to
the fiduciary advisor but, as it says on page 33, or any other party
with respect to whom a material affiliation or contractual relationship
of the fiduciary advisor resulted in a violation of that section,
certainly that could include, in the vagueness of it, the employer and
possibly any other person. So I think it does open up a substantial
liability and some vagueness which makes that liability unpredictable.
The bill we are looking at, the base bill, has strong accountability.
When you talk about getting advice from someone, I was even thinking
that all the advice that we get in whatever purchases we make, and I go
back to the individual who offers me advice on buying suits, a guy
named Harlan Logan. He is in Lexington, Kentucky. I know every suit I
buy from Harlan Logan, he is going to make money. He should make money.
He should be able to make a good, honest living for doing what he says.
But that does not keep him from giving me good advice on what he is
saying to me, and that is clearly disclosed. In the bill we have here,
that conflict of interest, as you call it, is disclosed. It is
disclosed at request. It is mandated to be disclosed on an annual basis
initially and if there are any significant changes.
I think the substitute bill here, the amendment, really impedes the
ability of employers to do what the purpose of this bill intends to do
and that is provide employees with good advice and to make sure that
they have a good retirement plan.
I would encourage Members to vote against that bill.
Mr. Speaker, I yield the balance of my time to the gentleman from
Ohio (Mr. Boehner).
Mr. BOEHNER. I thank the gentleman for yielding time.
Mr. Speaker, I want to thank the gentleman from Kentucky (Mr.
Fletcher) for his work on this bill and the gentleman from Texas (Mr.
Sam Johnson) and all of the work that they have put into it over the
last several years. I want to thank the gentleman from New Jersey (Mr.
Andrews), who has worked closely with me as we have developed this
bill. Obviously it does not have as many protections as he would like
at this point in time. But as I have pledged to him over the years, we
will continue to work through this process.
We have got a strong bipartisan bill. We have added new protections
or at least have an agreement to add some additional protections based
on a colloquy I had with the gentleman from North Dakota (Mr. Pomeroy).
But I think all of us know that the substitute that we have before us
just goes way too far. While it is well meaning and well intended,
expanding litigation in our country is not going to create an
environment for employers or their advisors to want to give investment
advice which I believe the substitute does. The extra regulatory
burdens that are contained in the substitute will again discourage
employers and their advisors from engaging in making sure that the
American workers get the kind of investment advice they need if they
are going to increase their retirement security.
Why is this investment advice so sorely needed? Because we have got
all kinds of problems out there, with people who are underinvested in
their self-directed accounts, having their money in low-yield
instruments for long periods of time when we know that over a course of
10, 20, 30 years, equities would provide a much greater return and much
greater retirement security.
On the other end of the spectrum, we know that we have got employees
who are overinvested in one sector or another and we have seen this
happen, especially in the technology sector, when people were
overinvested in that industry and what has happened to their self-
directed accounts over the last 18 months to 2 years.
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So we know investment advice is necessary.
We heard the gentleman from Kentucky (Mr. Fletcher) talk about the
advice that he got from his tailor. Let us say that an employee today
outside of his employment with his own savings, his or her own money,
if they want to go to a broker, a mutual fund, and they ask for advice,
guess what? They get all kinds of advice. Why? Because outside of
ERISA, outside of an employer-provided plan, there is plenty of advice.
What we are trying to do here is make sure that those same employees
within the employer plan have the same kind of access to that advice
that they have outside of the employer's plan.
So, Mr. Speaker, I would ask my colleagues to vote no on the Andrews-
Rangel substitute and to support final passage.
Mr. FLETCHER. Mr. Speaker, I have no further requests for time, and I
yield back the balance of my time.
The SPEAKER pro tempore (Mr. LaHood). Pursuant to House Resolution
288, the previous question is ordered on the bill, as amended, and on
the amendment offered by the gentleman from New Jersey (Mr. Andrews).
Pursuant to the previous order of the House, further consideration of
the bill is postponed.
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