Congressional Record, Volume 159 Issue 152 (Tuesday, October 29, 2013)

[Congressional Record Volume 159, Number 152 (Tuesday, October 29, 2013)]
[House]
[Pages H6855-H6869]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

RETAIL INVESTOR PROTECTION ACT

Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 391, I call
up the bill (H.R. 2374) to amend the Securities Exchange Act of 1934 to
provide protections for retail customers, and for other purposes, and
ask for its immediate consideration.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 391, in lieu of
the amendment in the nature of a substitute recommended by the
Committee on Financial Services printed in the bill, an amendment in
the nature of a substitute consisting of the text of Rules Committee
Print 113-23 is adopted, and the bill, as amended, is considered read.
The text of the bill, as amended, is as follows:

H.R. 2374

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Retail Investor Protection
Act''.

[[Page H6856]]

SEC. 2. STAY ON RULES DEFINING CERTAIN FIDUCIARIES.

After the date of enactment of this Act, the Secretary of
Labor shall not prescribe any regulation under the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1001 et
seq.) defining the circumstances under which an individual is
considered a fiduciary until the date that is 60 days after
the Securities and Exchange Commission issues a final rule
relating to standards of conduct for brokers and dealers
pursuant to the second subsection (k) of section 15 of the
Securities Exchange Act of 1934 (15 U.S.C. 78o(k)).

SEC. 3. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.

The second subsection (k) of section 15 of the Securities
Exchange Act of 1934 (15 U.S.C. 78o(k)), as added by section
913(g)(1) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (12 U.S.C. 5301 et seq.), is amended by adding
at the end the following:
``(3) Requirements prior to rulemaking.--The Commission
shall not promulgate a rule pursuant to paragraph (1)
before--
``(A) identifying if retail customers (and such other
customers as the Commission may by rule provide) are being
systematically harmed or disadvantaged due to brokers or
dealers operating under different standards of conduct than
those standards that apply to investment advisors under
section 211 of the Investment Advisers Act of 1940 (15 U.S.C.
80b-11); and
``(B) identifying whether the adoption of a uniform
fiduciary standard of care for brokers or dealers and
investment advisors would adversely impact retail investor
access to personalized investment advice, recommendations
about securities, or the availability of such advice and
recommendations.
``(4) Requirements for promulgating a rule.--The Commission
shall publish in the Federal Register alongside the rule
promulgated pursuant to paragraph (1) formal findings that
such rule would reduce the confusion of a retail customer
(and such other customers as the Commission may by rule
provide) about standards of conduct applicable to brokers,
dealers, and investment advisors.
``(5) Requirements under investment advisers act of 1940.--
In proposing rules under paragraph (1) for brokers or
dealers, the Commission shall consider the differences in the
registration, supervision, and examination requirements
applicable to brokers, dealers, and investment advisors.''.

The SPEAKER pro tempore. After 1 hour of debate on the bill, as
amended, it shall be in order to consider the further amendment printed
in House Report 113-253, if offered by the gentleman from California
(Mr. George Miller) or his designee, which shall be considered read and
shall be separately debatable for 20 minutes equally divided and
controlled by the proponent and an opponent.
The gentleman from Texas (Mr. Hensarling) and the gentlewoman from
California (Ms. Waters) each will control 30 minutes.

=========================== NOTE ===========================

October 29, 2013, on page H6856, the following appeared: the
gentleman from Massachusetts (Mr. LYNCH)

The online version should be corrected to read: the gentlewoman
from California (Ms. Waters)

========================= END NOTE =========================

The Chair recognizes the gentleman from Texas.

General Leave

Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days within which to revise and extend their
remarks and include extraneous material in the Record on H.R. 2374,
currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. HENSARLING. 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.

[[Page H6857]]

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.

{time} 1500

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.
Mr. HENSARLING. Mr. Speaker, it is now my pleasure to yield 2 minutes
to the gentleman from Minnesota (Mr. Kline), the distinguished chairman
of the Committee on Education and the Workforce.
Mr. KLINE. I thank the gentleman for yielding.
Mr. Speaker, it has been 4 years since the recession ended, yet
economic growth is still anemic, job creation remains sluggish, and
wages are flat. With each passing day, countless Americans feel they
are falling further behind. In these difficult times, working families
shouldn't need to fear yet another regulatory scheme that will make it
more difficult to rebuild their retirement savings. That is why I
support the Retail Investor Protection Act, legislation that will force
the Department of Labor to hit the brakes on sweeping changes to the
way workers save for retirement.
For many Americans, investing in a retirement plan can be confusing
and, frankly, intimidating. Workers want to know their hard-earned
dollars are managed wisely and in a way that could lead to financial
security in their retirement years.
Investment professionals provide a crucial service to those who want
to plan for their retirement yet lack the time and expertise to manage
an investment portfolio. All investment advisers should be well
trained, adhere to the highest ethical standards, and promote the best
interests of their clients. Rules governing the actions of particular
investment advisers, also known as fiduciaries, have helped provide
workers with certainty for decades. However, since 2010, the Labor
Department has tried to expand the definition and duties of a fiduciary
and, in the process, diminished that certainty.
While we support looking for ways to modernize current fiduciary
regulations, the Department's recent proposal threatens to drive up
costs, restrict investment opportunities, and harm efforts to educate
workers about responsible retirement planning.
Despite bipartisan concerns, Department officials are still pursuing
this flawed approach behind closed doors. H.R. 2374 will force the
Department of Labor to abandon this misguided effort and help ensure
any future attempt to redefine ``fiduciary'' promotes the retirement
security of America's workers.
I want to thank Representative Wagner, Chairman Hensarling, and
members of the House Financial Services Committee for their strong
bipartisan leadership on this important issue.
I urge my colleagues to support the Retail Investor Protection Act.
Ms. WATERS. Mr. Speaker, I yield 3 minutes to the gentleman from
Massachusetts (Mr. Lynch), a member of the Financial Services
Committee.
Mr. LYNCH. I thank the gentlewoman for yielding.
Mr. Speaker, I rise today in opposition to H.R. 2374, the so-called
Retail Investor Protection Act. Despite its innocuous-sounding title,
the intent of this bill is not to protect investors, but to protect an
outdated system that systematically weakens the average American's
retirement savings protections.
When Americans sit down across the table from a financial adviser and
entrust their retirement nest egg, they expect the advice they receive
to be

[[Page H6858]]

the best financial advice for them. That is why when Congress created
the Employee Retirement Income Security Act in 1974, it did so with the
express purpose of protecting employees and their dependents through
robust disclosure requirements and fiduciary standards of care.
But the quality of advice they receive is often dependent on whether
their adviser is an investment adviser or a broker-dealer, a
distinction which is really a reflection of an accident of chance that
retail investors typically are not aware of and do not fully
understand.
Moreover, as employers have come to back away from defined benefit
pension plans to defined contribution plans like 401(k)s, average
workers more often are on their own to weigh advice received directly
from their financial adviser about how best to invest their retirement.
The result is a retirement savings system in which many workers often
are unaware that they are turning over their savings to advisers who
may have no legal requirement whatever to act in the worker's best
interest.
This bill before us today will make it harder for the Department of
Labor and the Securities and Exchange Commission to protect workers'
retirement savings at a time when expanding and strengthening those
retirement savings and protections has never been more important.
The average Social Security beneficiary receives about $1,200 per
month, or just under $15,000 per year, representing just 41 percent of
required pre-retirement income. With the cost of services for
retirees--such as health care, food, and other essentials--continuing
to go up, it is more important than ever that Americans have robust
retirement savings to supplement the modest benefit that Social
Security now guarantees.
Unfortunately, this bill before the House today takes us in the
opposite direction in order to protect its status quo. That is why AARP
opposes this bill. That is why the AFL-CIO opposes this bill. That is
why the Consumer Federation of America opposes this bill. That is why
Americans for Financial Reform opposes this bill. That is why I will
vote ``no'' on this bill, and I urge my colleagues to do the same.
Mr. HENSARLING. Mr. Speaker, it is now my pleasure to yield 6 minutes
to the gentlewoman from Missouri (Mrs. Wagner), the sponsor of the
legislation and an outstanding freshman member of our committee who has
led on this issue.
Mrs. WAGNER. Mr. Speaker, I first want to thank Chairman Hensarling
and Chairman Garrett for their leadership in bringing this bill to the
floor today. I also want to thank my Financial Services Committee
colleagues on both sides of the aisle for their work and support of
this bill.
Mr. Speaker, in recent weeks, we have been caught up in a fierce
debate over the imperiled balance sheet of our Nation. It goes without
saying that for a Nation that is $17 trillion in debt, getting our
Federal balance sheet under control remains of extreme importance for
future generations of Americans.
We must also keep in mind these days that it is not just the Federal
balance sheet that is upside down. Indeed, the household balance sheet
of American families is under some of the greatest stress we have seen
in decades. Median household income has declined by $2,400 since the
previous recession ended in June of 2009. Millions of Americans remain
out of work, and an alarming number of our fellow citizens have flat-
out given up on their search to find a job. Recent studies have shown
that an alarming percentage of Americans do not have adequate savings
set aside for their retirement. The fact is that many families in
Missouri and all across the country are struggling just to make it to
the 15th and the 30th of every month, let alone finding the ability to
put something away for retirement or for a rainy day.
Regrettably, despite all of these economic challenges, two Federal
agencies are on a path towards making it even harder for our fellow
citizens to save and invest money for the future. At issue are attempts
by the Department of Labor and the SEC to increase the liability of
financial professionals that provide services to hardworking families
all across our country. These new rules are likely to impose tremendous
new burdens on Main Street businesses and will take choices away from
hardworking families who understand better than anyone else what
investments are in their ``best interest.''
For example, when the Department of Labor originally proposed the new
``fiduciary'' rules in 2010, it was pointed out by several commentators
and by Republicans and Democrats in Congress that the likely result
would not have been enhanced investor protection. Rather, scores of
low- and moderate-income Americans would have suddenly found themselves
unable to work with a financial professional and unable to make
investments that would help them achieve financial security for their
future.
Similar dynamics are at play with the SEC. Without providing any
evidence of investor harm, the SEC is heading towards a rulemaking that
could disrupt the valuable relationship that Americans have with their
financial professionals. Perhaps most concerning, these two agencies
appear to be on a collision course with one another and could end up
issuing two very different and conflicting rules.
Recently, the SEC issued a 72-page request for information to support
a rulemaking, but nowhere, nowhere in this request did the SEC mention
the Department of Labor's fiduciary project or its effect on the SEC's
work. So despite the claims we have heard from both agencies, it
doesn't appear that there is much coordination going on at all. This
suggests that we are heading toward a situation where rules come into
conflict with one another, creating a great amount of confusion and
cost for businesses and retail investors.
That brings us to H.R. 2374, the Retail Investor Protection Act,
which passed the House Financial Services Committee in June by a
bipartisan vote of 44-13. To those who are just tuning in to this
debate, it may help to understand exactly who it is we are talking
about when we use the term ``retail investor.''
``Retail investor'' could describe two young working parents that are
trying to figure out ways to save for that first home. It could
describe a single mother who has scraped together $1,000 to open up an
IRA or an educational account for her child. Or it could describe a new
dad looking to set up an insurance policy for his family.

{time} 1515

It is these Americans that will be hurt the most by overbearing and
misguided rules that prohibit them from making investments they both
want and desperately need.
So the underlying legislation is quite simple. First, it requires
that the Department of Labor wait for the SEC to act before issuing new
fiduciary rules. I would note that a recent letter from 10 Democratic
Senators to the Office of Management and Budget made this very same
request.
Second, the legislation requires that the SEC identify whether
investors are being harmed or disadvantaged under current regulations.
In other words, the SEC would have to identify a problem it is trying
to address. The SEC would also have to identify whether new rules would
restrict investor access to financial products and services and show
that any final rule would actually reduce any confusion investors have
over standards of conduct within the industry.
In short, this bill brings much-needed checks and balances to a
regulatory process gone bad.
We must remember what is at stake here. Americans invest trillions of
dollars through IRAs, education accounts, and other investment
vehicles. The Retail Investor Protection Act would require that Federal
agencies act in the best interest of all investors and would go a long
way towards preserving access to financial services for Americans of
all income levels.
I thank my colleagues again for their support, and I urge passage of
the bill.

Chamber of Commerce

United States of America,

Washington, DC, October 28, 2013.
To the Members of the U.S. House of Representatives: The
U.S. Chamber of Commerce, the world's largest business
federation representing the interests of more than three
million businesses of all sizes, sectors, and regions, as
well as state and local chambers and industry associations,
and dedicated to promoting, protecting, and

[[Page H6859]]

defending America's free enterprise system, strong supports
H.R. 2374, the ``Retail Investor Protection Act.'' The
Chamber believes that ensuring retail investors have
continued access to their choice of financial products and
services that best meet their needs will help meet investment
objectives, secure retirement security, and bolster long-term
economic growth.
If enacted, the Retail Investor Protection Act would
require that the Securities and Exchange Commission (``SEC'')
complete a rulemaking on fiduciary standards for broker
dealers before the Department of Labor (``DOL'') finalizes
its rule redefining a fiduciary under the Employee Retirement
Income Security Act, as the two agencies have shown to work
at cross-purposes on their fiduciary initiatives. Due to the
increasing overlap between the DOL and SEC in the area of
retirement plans and the related nature of each agency's
fiduciary initiative, the Chamber believes that the two
agencies should coordinate and work in a systematic manner,
allowing the SEC to complete its rules first to avoid
investor confusion, regulatory conflict, and one rule being
usurped by the other.
H.R. 2374 would also require that before the SEC
promulgates new rules expanding the fiduciary standard in the
retail investor context, it must first (1) identify any
issues with the current fiduciary structure; and (2) identify
whether uniform fiduciary standards for broker dealers and
investment advisors would have any adverse impact, resulting
in reduced products and services for retail investors. These
are all common sense measures that would ensure the
appropriate balance in investor protection while mitigating
potentially harmful consequences.
The Chamber also opposes an amendment expected to be
offered by Rep. George Miller and Rep. John Conyers, which
would completely undermine the intent of a provision in H.R.
2374 by giving DOL free reign to promulgate rules without
prioritization and consideration of the SEC's fiduciary
initiative. Moreover, the Miller-Conyers Amendment would also
deprive owners, directors, and shareholders of the ability to
manage a business by authorizing the DOL to set compensation
for investment advisors and financial services providers,
thus shifting some securities oversight away from the SEC and
to the DOL.
The Chamber strongly supports the Retail Investor
Protection Act and opposes the Miller-Conyers Amendment. The
Chamber may consider including votes on, or in relation to,
this bill and the Miller-Conyers Amendment in our How They
Voted scorecard.
Sincerely,
R. Bruce Josten,
Executive Vice President.
____

National Association

of Plan-Advisors,

Arlington, VA, September 25, 2013.
Congresswoman Ann Wagner,
Re ASPPA Support of H.R. 2374, the Retail Investor Protection
Act

Cannon House Office Building,
Washington, DC.
Dear Congresswoman Wagner: On behalf of the 6,700 members
of the National Association of Plan Advisors (NAPA), I would
like to express our support for H.R. 2374, the Retail
Investor Protection Act. We commend you for your leadership
on this important issue.
As you know, both the Department of Labor (DOL) and the
Securities and Exchange Commission (SEC) have indicated they
are moving forward with proposed rules that would expand
``fiduciary'' responsibilities to more investment
professionals. NAPA is especially concerned that these
proposed regulations could increase costs and limit
availability of products and advice for retail investors,
especially those with low or moderate incomes. Additionally,
NAPA is concerned that the regulations could result in retail
investors not receiving assistance from their trusted
investment professionals based on whether their accounts are
after-tax retail accounts or tax-favored IRAs.
Your legislation includes two provisions that NAPA
especially supports. First, it prohibits the DOL from issuing
any new fiduciary rules until sixty (60) days after the SEC
finalizes its rule. Second, it requires the SEC to identify
whether expanded fiduciary standards would result in less
access to investment products and advice for retail investors
and to submit formal findings that any final rule would
reduce retail investor confusion about standards of care that
apply to brokers, dealers and investment advisors.
Again, thank you for your leadership on this issue. We look
forward to working with you on passage of this important
legislation in both the House and the Senate.
Sincerely,
Brian H. Graff, Esq., APM,
Executive Director/CEO.
____

September 30, 2013.
Hon. Ann Wagner,
House of Representatives, 435 Cannon House Office Building,
Washington, DC.
Dear Representative Wagner: On behalf of the Association
for Advanced Life Underwriting (``AALU''),\1\ thank you for
all of your hard work on H.R. 2374, ``The Retail Investor
Protection Act of 2013.'' This bipartisan legislation, which
you introduced and led through the Financial Services
Committee, will help ensure that any rulemaking undertaken by
the Secutities and Exchange Commission (``SEC'') to modify
the standards of conduct and other regulatory requirements
applicable to brokers, dealers, and investment advisers \2\
is sufficiently supported by empirical information and
focused principally on remedying the identified problem of
investor confusion without raising costs and reducing choices
for investors.\3\
The SEC is considering whether to engage in a rulemaking
that would impose a ``uniform fiduciary duty'' on all
brokers, dealers, and investment advisers providing
personalized investment advice about securities to retail
customers. The sole impetus for such a rule is the SEC's
concern about investor confusion over the roles and legal
obligations of financial professionals. The SEC appears to be
operating from a presumption that the regulatory regime
governing brokers and dealers is disproportionately
responsible for creating this investor confusion and is
seeking to address it by imposing a broad principles-based
fiduciary duty on broker-dealers, breaking with eighty years
of rules-based regulation.
The problem of investor confusion does not dictate a
regulatory solution of this sort. There is no evidence to
suggest that such a rule would provide consumers with better
or clearer information about the roles and obligations of the
financial professionals that serve them, nor is there reason
to believe that it would enable consumers to make better-
informed investment decisions.
Indeed, because, as the SEC has acknowledged, a ``pure
fiduciary duty'' is unworkable in the context of the broad
activities of a broker-dealer, any new fiduciary duty imposed
on the industry will include exceptions for various types of
activities--leaving investors even more confused as to what
the legal obligations of their financial professionals might
be. For this reason, the AALU has urged the SEC to directly
address the problem of confusion through enhanced disclosure,
not to do so through an entirely new regulatory approach that
purports to apply uniformly to financial professionals--when,
in practice, it does not.
H.R. 2374 would build into the rulemaking process important
safeguards to ensure that the SEC adequately justifies any
rule prescribed to improve investor confusion and that it
appropriately tailors such a rule in a way that remedies the
identified problem, but does not adversely affect consumers
in the process of doing so. Specifically, the legislation
requires the SEC to identify, prior to any rulemaking, if:
current differences in the legal and regulatory obligations
of brokers, dealers, and investment advisers actually produce
harmful outcomes for retail customers--and--whether the
adoption of the ``uniform fiduciary duty'' as proposed by the
SEC could in fact have an adverse impact on consumers by
limiting access to investment advice, raising costs, and
adding to investor confusion.
Should the SEC proceed with a rulemaking, H.R. 2374 would
require the SEC to publish alongside a proposed rule formal
findings that demonstrate how the rule would reduce investor
confusion. Finally, the legislation imposes a stay on the
promulgation of conduct regulations by the Department of
Labor (``DOL''), which is currently considering a rulemaking
that would redefine the term ``fiduciary'' for purposes of
the Employee Retirement Income Security Act of 1974
(``ERISA''). This provision would allow the SEC to freely
carry out the congressional objective underlying Section 913
of the Dodd-Frank Act \4\ without concern over any potential
interference from the DOL, which, through its anticipated
rulemaking, may or may not encroach upon marketplace activity
traditionally governed by the securities laws and overseen by
securities regulators.
If enacted, H.R. 2374 will ensure a thorough fact finding
by the SEC and, if necessary, will result in regulation
targeted to address the problem originally contemplated by
Congress when it provided the SEC with this rulemaking
authority. We believe that such an outcome would greatly
benefit investors.
Again, we thank you for introducing H.R. 2374 and we look
forward to working with you and your staff as the 113th
Congress continues.
Sincerely,
David J. Stertzer,
Chief Executive Officer.
\1\ The AALU is a nationwide organization comprised of more
than two thousand life insurance agents and professionals
primarily engaged in sales of life insurance used as part of
estate, charitable, retirement, and deferred compensation and
employee benefit services. The AALU is organized behind a
mission to promote, preserve and protect advanced life
insurance planning for the benefit of our members, their
clients, the industry and the general public.
\2\ Pursuant to Section 913(g)(1) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (``Dodd-Frank
Act'').
\3\ For additional information on the AALU's support of
H.R. 2374, see Legislative Proposals to Relieve the Red Tape
Burden on Investors and Job Creators: Hearing Before the H.
Subcomm. On Capital Mkts. and Gov't Sponsored Enters, of the
H. Comm. on Fin. Servs., 113th Cong. (2013) (statement of Ken
Ehinger, President and CEO, M Securities, Inc.), available at
http://financialservices.house.gov/UploadedFiles/HHRG-113-
BA16-WState-KEhinger20130523.pdf.
\4\ Namely, an evaluation of the need for a new standard(s)
of conduct and harmonization of the regulation of brokers,
dealers, and investment advisers--and, if warranted by the
SEC's findings, the promulgation of rules to establish new
requirements.

[[Page H6860]]

____
Independent Insurance Agents

& Brokers of America, Inc.

September 30, 2013.
Hon. John Boehner,
Speaker, House of Representatives, Washington, DC.
Hon. Nancy Pelosi,
Minority Leader, House of Representatives, Washington, DC.
Dear Speaker Boehner and Minority Leader Pelosi: On behalf
of the Independent Insurance Agents & Brokers of America
(IIABA or the Big ``I''), I write today in support of H.R.
2374, the ``Retail Investor Protection Act'' introduced Rep.
Ann Wagner (R-MO). With over a quarter of a million agents
and employees nationwide, the Big ``I'' is the largest
association of insurance producers in the United States.
The IIABA is greatly concerned that agents, brokers and the
consumers they serve would be adversely affected by the
establishment of a universal fiduciary standard of care. An
expansion of the fiduciary duty promises to create undue
compliance burdens and increased liability for our small
business membership, thereby increasing costs for consumers
and restricting access to quality investment advice for those
most in need. Furthermore, simultaneous and possibly
overlapping rulemakings by the Department of Labor (DOL) and
the Securities and Exchange Commission (SEC) have the
potential to create confusion in the marketplace and even
more liability concerns for marketplace participants.
Rep. Wagner's bill would create a number of important
checks and balances on the rulemaking process to ensure that
consumers are not harmed by an expansion of the fiduciary
duty. First, it would require the DOL to wait until 60 days
after the SEC finalizes any fiduciary rule before issuing its
rule. The measure would also require the SEC to determine
that any new mandate would not harm consumers or restrict
access to investment advice, and would require the completion
of a cost-benefit analysis.
The IIABA thanks you for scheduling H.R. 2374 for
consideration this week and urges all members to support this
important legislation.
Sincerely,
Charles Symington,
Senior V.P. of External & Government Affairs.
____

United States Senate,

Washington, DC, August 2, 2013.
Hon. Sylvia Matthews Burwell,
Director, Office of Management and Budget, Washington, DC.
Dear Director Burwell: We write with regard to the work the
Securities Exchange Commission (SEC) is currently undertaking
to implement Section 913 of the Dodd-Frank Act, and its
intersection with the work the Department of Labor (DOL) is
currently engaged in to redefine the term ``fiduciary'' under
the Employee Retirement Income Security Act of 1974 (ERISA).
We remain very concerned that uncoordinated efforts
undertaken by the agencies could work at cross-purposes in a
way that could limit investor access to education and
increase costs for investors, most notably Main Street
investors.
The fundamental purpose of Section 913 of the Dodd-Frank
Act is to provide for the establishment of a uniform
fiduciary standard that applies equally to Broker-Dealers and
Registered Investment Advisors for the benefit of investors
when personalized investment advice is provided. While it is
unclear what the Department of Labor's re-proposal in this
area will look like, the Department's 2010 proposal could
have caused all Broker-Dealers that service Individual
Retirement Accounts (IRAs) to be ERISA fiduciaries, which
would have as a practical matter eliminated access to
meaningful investment services for millions of IRA holders.
We believe that Congress clearly intended that a single
standard should apply to retail accounts, including
retirement accounts, based on the specific guidelines
enumerated in Section 913. We are concerned that while the
SEC is proceeding in accordance with its Congressional
mandate, the DOL seems poised to issue a regulation that
could directly conflict with the SEC's work.
Given the Office of Management and Budget's role in
coordinating and streamlining Agency regulations, we write to
make you aware of the potential conflict between these
regulations. We would also encourage you to promote
regulations that are workable and encourage, rather than
limit professional investment education and guidance. We
believe that, at a minimum, the Department of Labor should
not issue final regulations in this area until the SEC has
completed its work and that any regulation the DOL ultimately
may propose should be carefully crafted so that it does not
upend the SEC's work.
We urge you to review any regulation proposed by the DOL to
be sure it does not undermine the SEC's implementation of a
fiduciary standard for the benefit of retail investors. We
know that you share our goal of ensuring that any regulations
issued in the area are consistent rather than working at
cross-purposes and we look forward to working with you in
furtherance of this goal.
Sincerely,
Jon Tester,
United States Senator.
Claire McCaskill,
United States Senator.
Tom Carper,
United States Senator.
Mark Begich,
United States Senator.
Ben Cardin,
United States Senator.
Mark Warner,
United States Senator.
Kay Hagan,
United States Senator.
Amy Klobuchar,
United States Senator.
Mark Pryor,
United States Senator.
Kirsten Gillibrand,
United States Senator.
Ms. WATERS. Mr. Speaker, I yield 3 minutes to the gentleman from
Minnesota (Mr. Ellison), cochair of the Progressive Caucus, a member of
the Financial Services Committee, and Democratic whip.
Mr. ELLISON. I want to thank the ranking member, Congresswoman
Waters, for the time, and I thank the chairman.
We have a crisis in our country, and the crisis has to do with
retirement. This retirement crisis is huge. We literally have about
$6.6 trillion between what people have for retirement and what they
need for retirement.
And so the Labor Department is doing what makes sense: making sure
that when a person representing themselves as a financial adviser is
going to a person who wants to retire--rollover a 401(k) or whatever--
they are getting the best advice for them, and if the adviser is making
money off the products they are pushing, that that would not be all
right.
But you know what? The Labor Department is not even done with the
rule. They are still writing it. But before they ever do, this shoddy
piece of legislation is going to try to interrupt that process. This
bad piece of legislation is going to interrupt the Department of Labor
as they are pulling together a rule to protect retirees.
We have a record amount of more than $10 trillion invested in
retirement accounts, and yet median retirement account balances are
about $45,000. That is a huge gap. Part of the reason this amount is so
low is due to the high fees and hidden commissions. An annual fee of 1
percent could lower the amount of an account by 21 percent over more
than 30 years.
I am grateful to the Department of Labor for their efforts to come
together to do a good plan. Too often, workers leave jobs and are
contacted by people who urge them to rollover their 401(k) investment
into an IRA. Too often, workers do not know that these callers are
salespeople who can put investors into accounts with high fees and
hidden commissions, yet this bill would not protect the public from
such rip-offs. Investors lose 3, 4, or 5 percent of the value of their
savings without even knowing about it.
This bill, H.R. 2374, is harmful. It prevents the Department of Labor
from taking steps to ensure advisers do not have conflicts of interest.
Why would anybody want to say, yes, have all the conflicts of interest
you want as you are messing with our retirees' accounts?
Taking the unprecedented step to stop an agency midprocess in
protecting workers is bad. That is why AARP, the National Council of La
Raza, the Consumer Federation of America, and many, many people
representing Americans oppose it.
This antigovernment rhetoric and all this stuff about government
regulation we hear all the time is the same rhetoric that led to the
shutdown that undermined the interests of American workers. Let's just
shut this bill down. It is not good.

Statement of Administration Policy

[[Page H6861]]

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. These ongoing rulemakings
are designed to protect trillions of dollars in retirement
savings of millions of workers and retirees by ensuring that
paid advisors and other entities do not place their own
financial interests over those of their customers. This
legislation would place an unnecessary obstacle in the way of
these efforts to prevent such harmful conflicts of interest,
which hurt businesses, consumers, and retirees and their
families.
If the President were presented with H.R. 2374, his senior
advisors would recommend that he veto the bill.

Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from
Tennessee, Dr. Roe, a distinguished member of the Education and the
Workforce Committee.
Mr. ROE of Tennessee. I thank the chairman.
Mr. Speaker, I rise in support of the Retail Investor Protection Act
and preserving access to financial advice to all Americans.
The Department of Labor's efforts to redefine the fiduciary standards
is classic Washington. It is a solution in search of a problem. The DOL
has yet to present tangible evidence--beyond anecdotes--that workers
are being hurt by current law, nor has the Department conducted a
sufficient cost-benefit analysis.
This is not to say that the fiduciary standards must never be
changed. All of us, Republicans and Democrats, want to strengthen
workers' retirement security and perhaps need to modernize the
longstanding fiduciary standard; but instead of working with Congress,
the Department of Labor has single-mindedly pursued a course that would
actually drive up the cost of retirement planning and restrict access
to important investment advice. Millions of Americans could potentially
be left to prepare for retirement on their own. How on Earth could this
be a good thing?
The 2007 recession wreaked havoc on the retirement savings of
American workers. We should work together on responsible solutions that
will help workers enjoy their retirement years with financial security
and peace of mind.
I am privileged to serve as chairman of the Subcommittee on Health,
Employment, Labor, and Pensions, and that is precisely what we are
trying to do in the area of multiemployer pension reform. The
subcommittee has convened numerous bipartisan hearings to closely
examine the problems plaguing the multiemployer pension system and
potential solutions. In fact, we held such a hearing earlier today.
Will we all agree on every point? Of course not. However, we remain
committed to working together on real solutions that will promote the
best interests of American families.
I hope the Department of Labor will reconsider its ill-conceived
approach to revising Federal fiduciary standards and work with
Congress, interested stakeholders, and other Federal agencies to
strengthen the retirement security of hardworking Americans. Until the
Department does what is right and changes course, I urge my colleagues
to support the Retail Investor Protection Act.
Ms. WATERS. Mr. Speaker, I yield 3 minutes to the gentlelady from New
York (Mrs. Carolyn B. Maloney), who serves as the ranking member on the
Subcommittee on Capital Markets and Government Sponsored Enterprises of
the Financial Services Committee.
Mrs. CAROLYN B. MALONEY of New York. I thank the ranking member for
yielding and for all her hard work, and I thank the chairman.
Mr. Speaker, I rise in opposition to H.R. 2374. The bill would
require the Securities and Exchange Commission to conduct yet another
cost-benefit analysis of a fiduciary duty rule, apparently in the
attempt and hope of derailing a new fiduciary duty rule to protect
consumers. The Securities and Exchange Commission has already completed
a lengthy study on whether or not to propose a fiduciary duty rule for
brokers. That study included an extensive cost-benefit analysis.
So, my colleagues, outside of trying to derail a new consumer
safeguard, what could possibly be the purpose of requiring the SEC to
do yet another cost-benefit analysis on the exact same issue again? How
about we just take the first one and make two copies?
The rule also prohibits the Labor Department from even proposing a
rule until 60 days after the SEC finalizes its final rule. And what is
the harm, my colleagues, in allowing an agency--in this case, the Labor
Department--to release the proposed rule for public discussion, for
public input? Since when has Congress been afraid of a debate?

If my colleagues believe that the proposed rule gets it wrong, then
they have every opportunity to say so, as does the public, as do
businesses, and that is exactly what the public comment period is for.
That is what happened the last time the Labor Department proposed a
fiduciary rule; there were questions raised. They have recalled it to
reconsider it, and they are withdrawing that proposal and working on a
new one.
If the SEC has a better idea for a fiduciary duty rule, then let's
debate that one and have that released, but preventing an agency from
even putting out a regulatory proposal for public debate is flat-out
dead wrong.
This bill would delay and possibly derail important rulemaking at the
Securities and Exchange Commission and the Labor Department to protect
retirement security and investor protection rights. This is a
transparent attempt to slow down the rulemaking process and possibly
derail the whole rulemaking process for protections for consumers.
For these reasons, I urge my colleagues to vote ``no.''
Mr. HENSARLING. Mr. Speaker, I am now pleased to yield 3 minutes to
the gentleman from New Jersey (Mr. Garrett), chairman of the Financial
Services Subcommittee on Capital Markets and GSEs.
Mr. GARRETT. Mr. Speaker, I thank the chairman for advancing this
bill to the floor. I also congratulate the sponsor of the bill, Mrs.
Wagner, for leading forward with a piece of legislation that has, at
its heart, to work in a bipartisan manner to protect American investors
big and small, senior citizens, and regular people across this country
who are concerned about their investment, concerned about what they pay
for their advice and for their transactions. So I commend both of them
for moving this legislation along.
The other side of the aisle likes to get engaged with name-calling,
like ``shoddy,'' ``bad,'' ``rip-off,'' and throw out numbers which, I
guess, are just sort of pulled out of the air when they say, If it is 1
percent for this, how much over 30 years? If it is a commission of X, I
don't know, how much is it over 40 years?
I always wonder when I hear comments from the other side of the aisle
if they really actually sit and read the bill or do they just pull
these numbers out of a hat. But I did hear one of their comments which
went to the point of trying to help investors, which is: How do we help
Americans, and how do we do it in a bipartisan manner?
Well, this was one of the most bipartisan bills that we have ever had
coming out of our committee. Over half of the Democrats on the
committee said they are going to stand with Americans, stand with
investors. I will share some of those.
Mr. Sherman voted ``yes''; Ms. Moore said ``yes,'' stand with
Americans; Mr. Perlmutter said ``yes''; Mr. Himes said ``yes''; Mr.
Peters said ``yes.'' Messrs. Carney, Foster, Kildee, Delaney, Mrs.
Beatty, and Mr. Heck, to name just a few, joined with Republicans to
work in a bipartisan manner to stand with Americans and stand with
American investors, realizing that, at the end of the day, part of the
problem in Washington is too many agencies that are not communicating
with each other. Lack of communication is one of the problems that we
have seen in this country in the last few weeks and months.
All we are suggesting is that the various agencies, like the SEC and
the Department of Labor, actually coordinate and work together for
investors. How will they do that? Well, the SEC, is principally charged
with the responsibility of looking at the areas of broker-dealers and
investment advisers. And you know there is a difference on how they are
treated right now, and there is a reason for that. They have been
treated differently for eight decades, I guess, or so.
The SEC will be looking at this. As the gentlelady from New York has
indicated, there is a study outstanding right now. They are getting
comments

[[Page H6862]]

in already for that study. We are saying let's make sure we hear all
the information, collect all the data, and before we go forward, let's
have communication between these two agencies.
Let the SEC take the first step here. Nothing in here prevents them
from taking any final actions or final steps. Nothing in this bill
prevents the investor from being protected as these various agencies
see fit.
All we are really asking for is the SEC, the agency principally
charged with this, to take the first action, make sure they have the
data, then work in harmony with the Department of Labor, and at the end
of the day, we will be helping the American investors in a completely
bipartisan manner.

{time} 1530

Ms. WATERS. Mr. Speaker, I yield 4 minutes to the gentleman from
California, Congressman George Miller, who is the ranking member on the
Committee on Education and the Workforce.
(Mr. GEORGE MILLER of California asked and was given permission to
revise and extend his remarks.)
Mr. GEORGE MILLER of California. I thank the ranking member for all
of her work on this legislation and for her yielding me the time.
Mr. Speaker, I rise in opposition to H.R. 2374. This bill is very bad
news for working families. It protects the loophole in the law that
allows conflicted brokers and advisers to rip off ordinary Americans
who are trying to save for their retirements.
The 2008 financial crisis wiped out trillions of dollars of
Americans' retirement accounts. Working families now need help in
rebuilding those nest eggs, and they need better protection for their
savings. The SEC and the Labor Department have moved to provide these
protections, proposing to close the harmful loophole, but this bill
would scuttle those efforts. Here is what is at stake.
Millions of Americans are putting money aside every day in their
401(k)s and in their IRAs to save for retirement. They have to make
these investment choices, and Wall Street is more than happy to advise,
but some of those advisers and brokers have conflicts of interest,
often undisclosed conflicts of interest. The brokers know about their
conflicts of interest, and the brokerage houses know about their
conflicts of interest, but the person who is handing over his hard-
earned retirement funds doesn't know about the conflicts of interest.
The workers think they can trust this investment advice.
But what they don't know is that their advisers may get paid more
for, in fact, in actual cases, steering them into high-cost funds with
the worst performing of the family of funds. It is very good for the
family of funds, but it is very bad for that individual worker who is
now handing over his retirement nest egg. That product might have
higher fees than other products. It might underperform compared to
other products. In other words, the product is not in the worker's best
interest, but it certainly is in the broker's best interest.
The SEC and the Labor Department are trying to close this loophole
that allows this rip-off to continue to happen, and it is, indeed, a
rip-off of ordinary Americans. I know my friend from New Jersey doesn't
like the term ``rip-off,'' but that is what is happening to these
hardworking American families. Multiple studies--not conjecture--have
found that these conflicts of interest cost these retirees, these
workers, very real money.
In 2009, the GAO found that, when a pension consultant has conflicts
of interest, a defined benefit retirement plan underperforms by 130
basis points. If a conflicted broker in the defined contribution world
recommends funds at a similar rate of underperformance, a 40-year-old
worker who rolls over his $20,000 401(k) balance into an IRA will see
his retirement savings cut by a third over 30 years. If he normally
earns 6 percent returns, he would now only be making a 4.7 percent
return. The bottom line is he is $35,000 poorer by the time he reaches
70. Thank you for that conflicted advice.
This year, researchers found that the funds recommended by conflicted
brokers in 401(k) plans underperformed by an average of 3.6 percent.
That translates into workers losing $1 billion every month from their
retirement funds because of these conflicts of interest. As a result,
consumers are getting bad advice and are putting their retirement
savings at stake.
Where do those figures come from?
They come from the founders of the Vanguard funds, who worked out the
differences between these funds, conflicted funds, and other funds.
That is why the Dodd-Frank law directs the SEC to transition brokers to
a fiduciary standard, and, separately, the Department of Labor is
trying to align the protections as well.
Brokers need to either act solely in the best interests of investors
or otherwise disclose who they work for and how they are paid, but some
on Wall Street have cried out, claiming that they will not be able to
offer investment advice, especially to working people, if they cannot
offer conflicted advice. They can't tell you how to invest your money
unless they can offer you conflicted advice wherein they are getting
paid more to offer you a substandard product. With the knowledge of
that and the higher fees, they somehow can't make money. Let's remember
that 75 percent of the brokers can't beat the S&P 500 that is on
automatic pilot.
The SPEAKER pro tempore. The time of the gentleman has expired.
Ms. WATERS. I yield the gentleman an additional 1 minute.
Mr. GEORGE MILLER of California. I thank the gentlewoman for
yielding.
Mr. Speaker, is that what they are really saying? Is that what
American workers want to know--if I don't give you money, for which you
can keep secret conflicts of interests that you have with the
investment of my money, I have to give you my money anyway if I am
looking for this investment? That is absolutely wrong.
The American worker deserves better than that. These people work hard
to make the decisions to try to save, to add to their 401(k)s, and you
want to talk about, oh, we should educate them about the value of a
401(k) and about the value of an IRA. You can educate them until the
cows come home, but if they know that somebody is stealing their money
because someone can conceal a conflict of interest, all of that
education won't make a damned bit of difference because the fact of the
matter is they've worked too hard to hand over their money to those
conflicted advisers.
That is what this bill is about. This bill would continue those
conflicts, make every effort to delay and stop this rulemaking--or we
change the law, we go forward, we protect working families, we protect
the retirees, and we make sure that the financial marketplace is free
of these conflicts of interest.
Again, I thank the gentlewoman for all of her effort on this
legislation.
Mr. HENSARLING. Mr. Speaker, I am pleased now to yield 2 minutes to
the gentleman from North Carolina (Mr. McHenry), the chairman of the
Financial Services Subcommittee on Oversight and Investigations.
Mr. McHENRY. I want to thank the committee chairman as well, Mr.
Hensarling, for yielding to me, and I want to thank my colleague Ann
Wagner from Missouri for putting together this very wise bill.
Mr. Speaker, I would say to my Democrat colleagues on the other side
of the aisle who are speaking out with loud voices that the only rip-
off here is when retail investors and the American people have two
different government agencies writing rules. When they are not
coordinating with each other and when they are not talking to one
another, they are not writing rules that work together. In fact, you
could be a retail investor and be complying with the Department of
Labor's rules but could be running counter to the Securities and
Exchange Commission's rules if this coordination is not done as
required by this legislation.
So the Retail Investor Protection Act is just that. It protects
retail investors. It reconciles uncoordinated efforts between the
Securities and Exchange Commission and the U.S. Department of Labor,
and it says that they have to work together and also use a cost-benefit
analysis when they are writing these rules.

I think that is a very wise thing. In fact, the court system has
agreed that it is a wise thing, and 44 members of the House Financial
Services Committee thought it was a wise thing, while only 13 opposed
passing this out.

[[Page H6863]]

Also, we have 10 Democrat United States Senators who have written to
the Office of Management and Budget, making an identical request as
this bill to the SEC, stating that the SEC act first in writing these
rules before they come together.
So, today, it is not only a bipartisan vote but also a bicameral
vote, both the House and the Senate. I would ask my colleagues to
support this bipartisan bill coming out of Financial Services in order
to make sure that our government agencies actually coordinate when they
write rules. Let's actually protect retail investors and do that first.
Ms. WATERS. Mr. Speaker, I yield 3 minutes to the gentleman from
Virginia, Mr. Bobby Scott, who is on the Judiciary Committee and who is
the ranking member on its Subcommittee on Crime, Terrorism, Homeland
Security, and Investigations.
Mr. SCOTT of Virginia. I thank the gentlelady for yielding.
Mr. Speaker, I rise in opposition to H.R. 2374, the so-called Retail
Investor Protection Act. H.R. 2374 delays the Department of Labor's
rulemaking process that would protect investors from unscrupulous
investment scams.
Now, in past generations, pension plans were what were called
``defined benefit plans'' in which there were defined benefits. You
would look at the number of years, your last salary, and the multiple,
and you could calculate what your pension would be. But more and more
we are seeing defined contribution plans in which the employer just
makes a contribution, and the final benefit would be whatever happens
to the money over the years with the investment advice that you would
be given. The trend has had a profound impact on ultimate retirement
benefits and security.
Two people investing the same amount--for example, $100 a month over
30 years--could see very different retirement savings over that same
period of time based on the investments they chose. Those investment
choices could be the difference between a savings at the end of
$100,000 or as much as $500,000 depending on which strategies were
used. Now, most employees are not sophisticated investors, and
therefore they need advice on what investment strategies should be
used. How much should be in stocks? how much in bonds? how much in
mutual funds, and which mutual funds? They seek advice.
The rule that the Department of Labor introduced in 2010 and will
most likely reintroduce this fall simply requires that an investment
adviser provide advice as a fiduciary responsibility to the investor,
consistent, therefore, with the best interest of the investor, not with
what would ultimately be most profitable to the adviser. That is, he
has a duty to give primary consideration to the investor, not to his
own profit. There are a lot of different products. A lot of mutual
funds have extremely high fees when comparable funds--even better
funds--have lower fees. Often the adviser will push products that are
totally inappropriate for the investor, which is compromising the
investor's retirement security in the long run but which is maximizing
the profits for the adviser.
The bill we are considering today will allow investments to be sold
which are laden with conflicts of interest and would immunize advisers
who give self-serving, unscrupulous advice from any liability. There is
an apparent belief that investment advice that is self-serving and full
of conflicts of interest is better than no investment advice at all.
That is absolutely absurd. There is nothing wrong with those selling
investment products to be required to give primary consideration to the
investors they are purporting to advise.
The SPEAKER pro tempore. The time of the gentleman has expired.
Ms. WATERS. I yield the gentleman an additional 1 minute.
Mr. SCOTT of Virginia. Mr. Speaker, the bill that we are considering
today would delay the rulemaking that would take the necessary steps to
protect employees and retirees who are currently being taken advantage
of by investment advisers who are giving this unscrupulous advice.
Millions of Americans look to financial advisers for advice. There is
nothing wrong with requiring them to have a fiduciary responsibility to
those they are advising. It is about time that we make sure the
investors are getting the good advice that they deserve. Therefore, we
should defeat this bill.
Mr. HENSARLING. Mr. Speaker, I now yield 2 minutes to the gentleman
from Virginia (Mr. Hurt), the vice chairman of the Financial Services
Subcommittee on Capital Markets and GSEs.
Mr. HURT. Thank you to the chairman of this committee, and thank you
to the sponsor for your leadership on this issue.
Mr. Speaker, I rise today in support of the Retail Investor
Protection Act.
Fifth District Virginians and Americans across the country are
working hard to save for their futures, whether it be for their
retirements or college tuitions for their children. Unfortunately,
these hardworking Americans are being faced with the prospect of
increased costs and fewer choices for the financial products that they
currently rely on for their investments.
Currently, the Department of Labor and the Securities and Exchange
Commission have indicated they will move forward with rulemakings to
make changes to the fiduciary standards that would decrease the
availability of financial advice for retail investors and increase the
cost of financial advice for retail investors.
We must protect the ability of these Americans to choose the
financial professionals who best meet their investment needs, and this
bill is an important step in that direction. The Retail Investor
Protection Act ensures that retail investors, including many American
families, are not affected by unnecessary regulations that have been
put in place without sufficient economic analysis or regulatory
coordination.
I urge my colleagues to join me in supporting this important bill so
that Washington does not stand in the way of Americans' ability to seek
the best financial advice for their needs.
Ms. WATERS. Mr. Speaker, I yield 3 minutes to the gentleman from New
Jersey (Mr. Andrews), who is an expert on retirement savings. He is the
ranking member on the Education and the Workforce Subcommittee on
Health, Employment, Labor, and Pensions. He is also the cochair of the
Steering and Policy Committee.
(Mr. ANDREWS asked and was given permission to revise and extend his
remarks.)
Mr. ANDREWS. I thank my very good friend for yielding.
Mr. Speaker, so you are in the lunchroom at work. This guy comes in
from the investment house, and he shows 18 slides about the red fund--
smiling people who are on fishing trips and on European vacations. They
are really happy people.

{time} 1545

He shows one slide about the blue fund at the very end and finishes
his presentation. The red fund looks pretty good. What he doesn't tell
you is that he gets 2\1/2\ percent of every dollar you put into the red
fund, but \1/2\ of 1 percent of every dollar you put in the blue fund.
He neglects to mention that. So people rush and put their money in the
red fund.
Now, should his interest be aligned with you or should his interest
be aligned with his own interest? That is the question that is raised
by this bill.
The Department of Labor is writing a rule that for the first time
would say that that person standing in front of you in that room has a
fiduciary obligation to the person listening, that is to say that he
has to put the interest of the listener ahead of his own financial
interest.
Self-interest is the malignancy that brought the U.S. economy to its
knees 5 years ago. People who made mortgage transactions and insurance
transactions benefited them and not the people they are supposed to be
representing. To permit the cancer of self-interest to invade the
second most important asset people have in their lifetime, which is
their pension, would be an enormous mistake. That is a mistake that
this Department of Labor rule is trying to avoid. This bill is a
mistake because it rolls back those efforts and protections for the
American people.
John Bogle, the founder and patron of Vanguard, has estimated that
nearly 30 percent of people's pension funds have evaporated because of
unnecessary fees. If people want to choose a high-fee plan, that is
their choice; but

[[Page H6864]]

they should make that choice only after receiving the advice that is
fiduciary, that is directed to their own best interest, from a
competent professional.
The Department of Labor rule promotes that result; this bill
undercuts that result. For that reason, we should oppose this bill.
Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from
Missouri (Mr. Luetkemeyer), another distinguished member of the
Financial Services Committee.
Mr. LUETKEMEYER. Mr. Speaker, I would like to thank Chairman
Hensarling for all his fine work on this issue, as well as other
financial services issues.
I also would like to thank my good friend and neighbor in Missouri,
Mrs. Wagner, for introducing this legislation and all her hard work on
it. What she is trying to do here is propose legislation that tries to
solve a problem that we have got in the situation here with these two
agencies--DOL and SEC--trying to coordinate and propose a regulation
which they don't seem to be willing to do or do it in the right way.
As usual, when the bureaucracy tries to propose things, there always
are unintended consequences of those actions and those rulings. We have
here some of those unintended consequences, which Mrs. Wagner in her
legislation is trying to mitigate.
This proposal has the potential to drive up the cost and availability
of investment services and products for investors, particularly those
with low and moderate incomes. I will give you an example. I recently
spoke to a broker-dealer in rural Missouri who I represent, who is one
of only a handful of small brokers in a two-county radius. If the
Department of Labor rule moves forward, he, like many other small
broker-dealers, will have no choice, because of the way this rule is
written or being proposed, that they will stop offering his services to
clients, and many Missourians are going to be without or have limited
access to financial products and advice.
This hurts not only the big investors, but this hurts the small
investors. As I said earlier, you are talking about the low- and
moderate-income folks and, particularly, one of the most basic
investments that we have, which is the IRA. How basic can you get to
not allow people to be able to utilize an IRA if this goes into force?
So it is important today that we take this action. I, again, thank
the gentlelady from Missouri for her efforts, and I urge my colleagues
for support.
Ms. WATERS. Mr. Speaker, I would like to inquire as to how much time
we have remaining on this side.
The SPEAKER pro tempore. The gentlewoman from California has 5\1/2\
minutes remaining. The gentleman from Texas has 5 minutes remaining.
Ms. WATERS. I am prepared to close. However, I will reserve the
balance of my time if the chairman has other Members that he would like
to put forth at this time.
Mr. HENSARLING. We have one more speaker, and then we would allow the
gentlelady to close.
Then I believe I have the right to close, Mr. Speaker. Is that
correct?
The SPEAKER pro tempore. The gentleman is correct.
Mr. HENSARLING. At this time, Mr. Speaker, I yield 2 minutes to the
gentleman from South Carolina (Mr. Mulvaney).
Mr. MULVANEY. Mr. Speaker, I have been sitting here for the past 45-
50 minutes watching the debate. It strikes me that with all of the
financial terms and with some of the heated rhetoric--and it has been
heated--I never thought I would see the day where enlightened self-
interest was called a cancer in this Nation. I wonder what Alexis de
Tocqueville would think about that. But in any event, with all of that,
Mr. Speaker, it strikes me that we have lost sight of what we are
talking about. We are talking about a bill, what the bill specifically
does, and why.
Let's talk first about why we are here. We have a situation where
Dodd-Frank has given authority to the SEC to make some rules. The
Department of Labor also thinks it has the authority to make rules in
the same area.
I hope we can all agree that there is a potential for conflict there.
We all know what it is. We have seen it a hundred times before. We
don't want the SEC to come out and say that you can't do X and have the
Department of Labor come out the next week and say, but you have to do
X.
There are hundreds of examples like that in the Federal Government,
and this bill is simply trying to address that. How is it trying to do
that? What does the bill do?
Number one, it asks the two agencies to work together. Someone please
tell me how that is a bad thing--and a cancer of all things--on this
Nation.
It then requires the two agencies to actually try and figure out if
there is a problem--to ask them to identify a problem before they come
up with a solution. Again, I think this makes a good bit of sense. The
questions that we require them to ask in this bill are pretty simple:
Are investors being systematically harmed? Would new rules limit
people's access to investment advice? What are the costs and benefits
of the rule?
How is this controversial? And I would suggest to you, Mr. Speaker,
that it is not. That is the reason that it came out of committee on a
bipartisan basis, the reason it is going to pass today on a bipartisan
basis, and the reason that it has the bipartisan basis that it does in
the Senate.
Too often I think we get sidetracked by coming in here and giving big
speeches, and perhaps sometimes I am as guilty of that as anybody else.
But today we have completely lost sight of why we are here. I hope we
can come together and pass this bill this afternoon.
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

[[Page H6865]]

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.

Executive Office of the President, Office of Management
and Budget,
Washington, DC, October 28, 2013.

Statement of Administration Policy

H.R. 2374--Retail Investor Protection Act

(Rep. Wagner, R-MO, and Rep. Murphy, D-FL)

The Administration strongly opposes passage of H.R. 2374
because it would derail important rulemakings underway at the
Securities Exchange Commission (SEC) and the Department of
Labor that are critical to protecting Americans' hard-earned
savings and preserving their retirement security.
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. The
bill ignores the fact that significant work has already been
conducted in both agencies and that the agencies have
included and continue to include the public, industry, and
numerous stakeholders in their rulemaking processes.
Moreover, the two agencies are already working closely to
avoid conflicting requirements for the regulated community,
and this legislation would hamper effective coordination
between the two agencies. The bill would hinder efforts to
protect consumers from conflicts of interest among brokers,
dealers, financial advisors, 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.
These ongoing rulemakings are designed to protect trillions
of dollars in retirement savings of millions of workers and
retirees by ensuring that paid advisors and other entities do
not place their own financial interests over those of their
customers. This legislation would place an unnecessary
obstacle in the way of these efforts to prevent such harmful
conflicts of interest, which hurt businesses, consumers, and
retirees and their families.
If the President were presented with H.R. 2374, his senior
advisors would recommend that he veto the bill.

Groups in Opposition to H.R. 2374

1. AARP
2. AAUW
3. AFL-CIO
4. AFSCME
5. Alliance For Retired Americans
6. Americans for Financial Reform (AFR)-w/over 200
signatories
7. The Association of BellTell Retirees, Inc.
8. Certified Financial Planner Board (CFP)
9. Consumer Federation of America
10. Financial Planning Association
11. Fund Democracy
12. Investment Advisor Association (IAA)
13. National Council of La RAZA
14. The National Association of Personal Financial Advisors
(NAPFA)
15. The National Association of Professional Geriatric Care
Managers
16. North American Securities Administrators Association
(NASAA)
17. OWL-The Voice of Midlife and Older Women
18. Pensions Rights Center
19. ProtectSeniors.org
20. Public Citizen
21. Wider Opportunities for Women

Mr. HENSARLING. 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.

{time} 1600

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.
Mr. CRENSHAW. Mr. Speaker, as the Chairman of the Appropriations
Subcommittee on Financial Services and General Government, my
Subcommittee directly oversees the Securities and Exchange Commission's
budget. And since 2001 the SEC's budget has increased by over 200
percent . . . this is a larger increase than almost any other agency in
our government.
As the agency tasked with protecting investors and ensuring fair and
orderly capital markets, you would think they would carefully
coordinate with all agencies involved to ensure much needed certainty
and to provide clear guidance to a trillion dollar industry. However,
this again is not the case and we are here today to ensure that the SEC
and the Department of Labor coordinate and work in a systematic manner
to avoid investor confusion, regulatory conflict, and decrease costs
for retail investors.
This is why I rise today to put my support for H.R. 2374, the
``Retail Investor Protection Act.''--common sense legislation,
requiring the

[[Page H6866]]

SEC complete a rulemaking on standards of care governing broker dealers
and investment advisers before the Department of Labor finalizes their
rule redefining the definition of a person providing investment advice
under the Employee Retirement Income Security Act. Plain and simple,
ensuring collaboration between the two agencies that are trying to
reach the same goal.
In addition H.R. 2374 requires that before the SEC writes one new
rules on expanding fiduciary standards, they need to identify whether
investors are being harmed under current standards of care. We all need
to remember what's at stake here. American families invest trillions of
dollars in IRAs and through mutual funds, stocks, and bonds. The Retail
Investor Protection Act will ensure that federal regulators will not
lose focus on the impact these rules could have on retail investors and
must consider all other options first, before moving forward with broad
new regulatory mandates.
The lack of regulatory coordination between these two financial
regulators does not provide a cohesive landscape for investors and will
be difficult for service providers to follow. These rules affect the
lives of many and have profound and far reaching effects on our
economy. The SEC itself has acknowledged that the costs of this action
could ``ultimately be passed on to retail investors in the form of
higher fees or lost access to services and products.
We in Congress have an obligation to amend or fix provisions whose
costs outweigh purported benefits. Therefore, as we move forward with
the fiscal year 2014 budget in my Appropriations Subcommittee I plan to
address with Chairwoman White whether a more thorough economic analysis
of these rules are needed to ensure the SEC does not harm families who
are investing to build up their retirement or to save for college--the
very investors the SEC is supposed to protect. I urge my colleagues to
vote in favor of H.R. 2374.
Mr. VAN HOLLEN. Mr. Speaker, I am an advocate for consumer choice and
appreciate the value of a variety of different business models in a
competitive financial services marketplace. I also support full
transparency regarding compensation arrangements and believe investors
have a right to recommendations based on their best interests when
receiving investment advice from financial services professionals.
Consistent with these principles, the Securities and Exchange
Commission (SEC) and the Department of Labor (DOL) are currently in the
process of coordinating a harmonized ``fiduciary'' standard of care for
financial services professionals offering investment advice to their
clients. Rather than allowing the SEC and the DOL to complete their
work, today's legislation would prejudge the outcome of the ongoing
rulemakings and have the practical effect of delaying implementation of
final harmonized rules to protect consumers' retirement savings from
conflict of interests and potentially deceptive or abusive practices.
Accordingly, I urge a ``no'' vote.
The SPEAKER pro tempore. All time for debate on the bill has expired.

Amendment Offered by Mr. George Miller of California

Mr. GEORGE MILLER of California. Mr. Speaker, I have an amendment at
the desk.
The SPEAKER pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:

Page 1, line 5, strike ``After'' and insert ``(a) In
General.--Except as provided in subsection (b), after''.
Page 1, after line 14, insert the following:
(b) Exception.--
(1) In general.--The Secretary of Labor may issue a rule
that--
(A) establishes standards of care to improve investment
advice provided to participants and beneficiaries under the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1001 et seq.);
(B) requires that personalized investment advice is
provided in a fiduciary capacity that is in the best
interests of such participants and beneficiaries;
(C) requires that, before receiving investment advice, the
compensation of investment advisors and financial service
providers is clearly disclosed to such participants and
beneficiaries; and
(D) satisfies the requirements of paragraph (3).
(2) Process.--The Secretary of Labor may issue a rule
pursuant to paragraph (1)--
(A) after coordination and consultation with the Securities
and Exchange Commission; and
(B) after considering surveys and data on investment
education and investment advice.
(3) Participant investment education; appraisals.--The rule
issued pursuant to paragraph (1) shall provide standards of
conduct for--
(A) participant investment education;
(B) access to reliable investment education and investment
advice to traditionally underserved communities;
(C) reasonable compensation for investment advisors and
financial service providers; and
(D) fair market value appraisals of stock held by employee
stock ownership plans to employers, participants, and
beneficiaries under the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1001 et seq.).
At the end of the bill, insert the following:

SEC. 4. REPORTS ON THE IMPACT OF PRACTICES OF PERSONS WHO
PROVIDE INVESTMENT ADVICE.

(a) In General.--Not later than 90 days after the date of
enactment of this Act, the Secretary of Labor shall report to
Congress on how certain practices of persons who provide
investment advice affect the standard of care exercised in
relation to investors.
(b) Report Requirements.--Such report shall--
(1) describe how the structure of compensation for persons
who provide investment advice affects the standard of care
exercised by such persons, including--
(A) practices involving fees paid from investment vehicles
to such persons; and
(B) other forms of compensation paid to such persons that
are not dependent upon the investor's return;
(2) compare the standards of care exercised by persons who
provide investment advice to low-income and middle-class
investors with the standards of care exercised by persons who
provide investment advice to high-income investors, and the
effect such standards of care have on the investment vehicles
selected by investors; and
(3) evaluate the extent to which the standard of care used
by persons who provide investment advice affects the adequacy
of investment returns to provide for retirement for
investors.

The SPEAKER pro tempore. Pursuant to House Resolution 391, the
gentleman from California (Mr. George Miller) and a Member opposed each
will control 10 minutes.
The Chair recognizes the gentleman from California.
Mr. GEORGE MILLER of California. Mr. Speaker, I yield myself 3
minutes.
Mr. Speaker, the amendment that I am offering along with Mr. Conyers
is the way H.R. 2374 should have been drafted. Instead of short-
circuiting the regulatory process on behalf of Wall Street profits,
this represents the appropriate and balanced way forward to advise the
Department of Labor in their current rulemaking on investment advice.
First, Congress should not be in the business of shutting down any
and all efforts by the Department of Labor to make rules for
fiduciaries. The fiduciary rule is the cornerstone of pension law. It
is what makes sure that, when you hand your money over to someone else
to invest it for you, they are going to act in your best interest.
Stopping any and all regulatory action to ensure that people's
retirement nest eggs are protected is irresponsible. My amendment would
allow the Department to proceed.
At the same time, it addresses concerns that have been raised with
the Department of Labor's proposed rules. Under my amendment, Congress
would send a message to the Department of Labor that we want investors
protected, not Wall Street brokers or advisers trying to protect their
gravy train.
This amendment makes it clear that the Department may proceed with
better protections for retirement investors in a way that provides for
unbiased investment education, ensures that underserved communities are
not unduly harmed by basic financial protections for investors, ensures
reasonable competition to advisers, and protects employee stock
ownership plan appraisals.
We want investment advice to be provided in consumers' best
interests, not in whatever way makes advisers and brokers the most
money.
Studies show that most Americans who save think their investment
advisers are acting in their best interests. In fact, AARP found that
overwhelming majorities of consumers thought all advisers were required
to act in their best interests. But, in fact, they are not, under the
current law. They are not required to disclose that they have a
conflict of interest.
With poll after poll showing that most Americans are worried about
their retirement, they should have the confidence that their investment
adviser is working in their best interest, and not conflicted in the
advice he gives that person because he may receive additional fees or
higher commissions because of recommending a product that is not in
their best interest.
This amendment is a no-brainer. It supports consumers and their
retirement savings. It supports unbiased investment education. It
supports reasonable compensation for advisers for

[[Page H6867]]

the important duties they perform. This is a proper and balanced way
forward. I urge my colleagues to support the Miller-Conyers amendment.
I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I rise in opposition to this amendment.
The SPEAKER pro tempore. The gentleman from Texas is recognized for
10 minutes.
Mr. HENSARLING. 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.
Mr. GEORGE MILLER of California. Mr. Speaker, I yield myself 15
seconds.
I just want to say that it is an interesting concept that the only
way the investment community can continue to survive and offer advice
is if they can have the right to have conflicted advice--conflicted
advice--be protected by the law, as opposed to representing the person
that they are taking the money from to invest.
I now yield 3 minutes to the gentleman from Michigan (Mr. Conyers),
coauthor of the amendment.
Mr. CONYERS. Mr. Speaker, I want to thank George Miller for the work
he has done, along with the ranking member of the Financial Services
Committee.
The Miller-Conyers amendment simply encourages the Department of
Labor to issue a rule that requires investment advisers to provide
advice in a fiduciary capacity and protect access to investment
education, ensure reasonable compensation to advisers, and ensure the
availability of ESOP appraisals.
This is what we are seeking so badly, and this is the comment that
has been made about the inaccurate drafting of the bill. The Department
of Labor should issue a proposed rule that seeks to protect workers,
provide access to investment education, and ensure that advisers are
reasonably paid.
Under current rules, investment advisers may hold themselves out as
acting in workers' best interests even though they are not. I repeat:
under current rules, investment advisers may hold themselves out as
acting in workers' best interests even though they are not.
Workers in these types of plans often are required to choose between
dozens of investment choices and need the advice on their investment
options from people who do not have secret conflicts. Over 70 million
workers and retirees depend upon 401(k) retirement plans and IRAs for
their retirement savings. If there is any hope for this measure at all,
H.R. 2374, it would have to have this amendment on it. I plead with
those who enthusiastically support this measure to please support this
amendment.
Mr. HENSARLING. Mr. Speaker, I am now pleased to yield 3 minutes to
the gentlewoman from Missouri (Mrs. Wagner), the author of the Retail
Investor Protection Act.
Mrs. WAGNER. Mr. Speaker, I rise in opposition to the amendment. The
language of the amendment attempts to sound benign, but its inclusion
would undermine a key tenet of the legislation, which is a requirement
that the Department of Labor wait for the SEC to finish any rulemaking
in this area.
It has been noted time and time again by Chairman Hensarling and
others that 10 Democratic Senators recently sent a letter to the Office
of Management and Budget requesting that Labor wait on the SEC. So
there seems to be bipartisan and, as we have stated before, bicameral
consensus for the process here.
I also must say that I find some of the terms in the amendment
particularly troubling. The amendment would allow the Department of
Labor to define what constitutes a ``financial services provider,'' a
term that I believe is broad and which I am not sure the Department of
Labor has either the expertise or the jurisdiction to rule upon.
Paragraph 3 of the amendment also states that the Department of
Labor's rules should provide for ``reasonable compensation'' within the
industry. I, for one, do not believe that it is up to the Federal
Government to determine what constitutes reasonable compensation. That
is a determination that belongs to consumers and to investors who I
believe are more than capable of determining for themselves what is
reasonable.
The Retail Investor Protection Act would require that Federal
agencies act in the best interest of all investors and would go a long
way towards preserving access to financial services for Americans of
all income levels. This, Mr. Speaker, is about access. It is about
availability. It is about affordability for hardworking American
families and investors.
Mr. GEORGE MILLER of California. Mr. Speaker, I yield 3 minutes to
the gentleman from New Jersey (Mr. Andrews).
(Mr. ANDREWS asked and was given permission to revise and extend his
remarks.)
Mr. ANDREWS. I thank my friend for yielding.
Mr. Speaker, my friend, the chairman from Texas, asked, I think, a
couple of very important questions about this amendment, and he really
points out why I support it. First, he asked: Where is the proof that
American pensioners have suffered because of conflicted investment
advice?

[[Page H6868]]

{time} 1615

Mr. Speaker, we can all look to the Government Accountability Office,
which looked at that very question a few years ago, at Mr. Miller's
request and mine and several others, and found that upwards of 27
percent of people's accounts evaporated because of high fees in plans
in which they put their money in defined contribution accounts. That is
pretty significant proof.
As I said earlier on the floor, they could look to the opinion of
someone who is not political at all, I think, someone who is an expert
in this field, Jack Bogle, from Vanguard, who uses the number 30
percent in unnecessary fees that have gone up here. Proof is ample that
many Americans have rather paltry retirement accounts because of the
very high fees that they are paying.
Second, Mr. Speaker, the chairman talked about the suitability
standard under the securities law. That is kind of the point. The
suitability standard is not a fiduciary standard. The suitability
standard assumes an arm's-length transaction between people of equal or
similar competence, where it is every investor for him- or herself.
The pension situation is very different. This is a situation where
someone is driving a bus or building houses or teaching school or
working in a software company, and that is what they do. They don't do
investment all the time. So when they turn to someone for advice, they
are assuming that that someone is on their side, that the advice that
someone is giving them is in their best interests. That is the very
nature of a fiduciary relationship.
So I think the questions that were raised point out the reasons to
support Mr. Miller's amendment. There is ample evidence of harm that
has been done to America's investors; and, secondly, the suitability
standard is wholly insufficient to protect the interests of those
investors.
For those reasons, I urge a ``yes'' vote on this amendment, and a
``no'' vote on the bill.
Mr. HENSARLING. Mr. Speaker, may I inquire as to how much time each
side has remaining?
The SPEAKER pro tempore. The gentleman from Texas has 4 minutes
remaining, and the gentleman from California has 1\3/4\ minutes
remaining.
Mr. HENSARLING. Mr. Speaker, I yield 1 minute to the gentleman from
New Jersey (Mr. Garrett).
Mr. GARRETT. Mr. Speaker, I thank the chairman for yielding me time.
How you ended your comments was, Let's move this bipartisan amendment
to this bill, and what I was trying to do in a bipartisan manner was to
ask the question: Is simply what you are trying to do is to require
that investment advisers, that they would have to have, you are saying,
a fiduciary duty going forward? That is what you are trying to do to
add to this bill? I heard you say that, and I heard Mr. Miller say
that. That was my question to you.
You said it once. Mr. Miller said it twice. I made a note of it each
time. That is my question. That is what you basically want us to do.
You want us to make it the law that an investment adviser would have to
have a fiduciary standard to do in the best interest, if you will?
Mr. GEORGE MILLER of California. Will the gentleman yield?
Mr. GARRETT. I yield to the gentleman.
Mr. GEORGE MILLER of California. Do I believe that advisers have a
fiduciary relationship to the people that they are taking money from to
invest? I do. I think the law should reflect that, absolutely.
Mr. GARRETT. Earlier I said that I often wonder whether people who
come to the floor to oppose some of our bills ever actually read the
bill.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. HENSARLING. I yield the gentleman an additional 30 seconds.
Mr. GARRETT. Now I am going to go a step further. I wonder whether
the people who oppose this bill actually know what the law is.
The law is and has been for decades that, if you are an investment
adviser, you already have a fiduciary standard with regard to your
client. That is the current law. Already the investment adviser, going
through an ERISA plan, has a fiduciary standard. I think what you are
talking about is a broker-dealer.
Mr. GEORGE MILLER of California. Will the gentleman yield?
Mr. GARRETT. I yield to the gentleman.
Mr. GEORGE MILLER of California. That is what the amendment
addresses.
Mr. GARRETT. Exactly. That is why I asked both of you twice what you
said. What you said on the floor and what you just said a moment ago
is, you were talking about broker-dealers, but you said it was
investment advisers. It just points out, Mr. Speaker, that they come to
the floor with absolutely no understanding of what the law is.
Once again, we encourage the bill to go unamended.
The SPEAKER pro tempore. Members are again reminded to direct their
remarks to the Chair.
Mr. GEORGE MILLER of California. Mr. Speaker, does the gentleman from
Texas have additional speakers?
Mr. HENSARLING. I have no further speakers, Mr. Speaker, and I
believe I have the right to close.
Mr. GEORGE MILLER of California. Mr. Speaker, let me get this
straight. You can talk about the advisers having a fiduciary
responsibility and obligation under the law, but then you can have the
broker-dealers come in and close the deal, and they can provide
conflicted advice and, in fact, conflicted products--in the best
interest of this retired individual who is trying to invest their
funds? Very clever.
But this comes from an industry where we saw the banks sell a tranche
of mortgages to their best friends and customers and then immediately
bid against the success of that tranche of mortgages. So conflicted
advice can be very profitable. They worked it to a fare-thee-well among
the big players.
Now you come in with your $100,000, your $80,000, your retirement
funds, and you want to make an investment and you want some advice and
you want to talk to a broker, and the broker says, Oh, yes, we have
exactly the product for you. In fact, he or she has been told to sell
this product, even though it is not the best-performing product, it may
not be a match for this couple, but it has the highest commissions for
the firm and for the broker. That is what they do.
What you are suggesting is that should be written into the law, that
conflict of interest, and you talk about all the terrible things that
happen. But when the adviser fiduciary study was done in 2013, 68
percent said the fiduciary--this is of the investment industry--68
percent said the fiduciary standard will not reduce products or
services; 79 percent said it does not cost more to work as a fiduciary;
and 65 percent said the fiduciary standard will not price investors out
of the market. So the industry says that, but you have a whole theory
how this is doomsday for the small investor. It is just not so.
What you are doing is protecting the right of brokers to give you
conflicted advice about the investment of your money, and they
knowingly do it. You are saying that the industry cannot continue
unless they are allowed to continue to give conflicted advice. That is
why we have conflict of interest laws, because we don't allow people to
do this when they have a responsibility.
We should vote for this amendment and vote against the bill.
I yield back the balance of my time.
Mr. HENSARLING. Mr. Speaker, how much time do I have remaining?
The SPEAKER pro tempore. The gentleman from Texas has 2\1/2\ minutes
remaining.
Mr. HENSARLING. 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

[[Page H6869]]

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.
The SPEAKER pro tempore. Pursuant to the rule, the previous question
is ordered on the bill, as amended, and on the amendment offered by the
gentleman from California (Mr. George Miller).
Pursuant to clause 1(c) of rule XIX, further consideration of H.R.
2374 is postponed.

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