President Obama came down squarely on the side of working families when he announced his support for reforms to establish a higher standard for investment advice. Developed and championed by the Department of Labor (DOL), these reforms will update a set of 40-year old rules governing those who give advice affecting the investment of money in employee retirement plans.
In recent years, it has become more and more difficult for most people to save for retirement. At the same time, a great many hardworking Americans have missed out on tens or even hundreds of thousands of dollars in potential retirement savings by following the advice of financial professionals who, because of outdated rules, are allowed to put their own interests ahead of the interests of those they advise…
If federal regulations and ethical standards for pension fund asset managers are to have “any meaning,” the Department of Labor must not give Credit Suisse a waiver, say AFR and the AFL-CIO in a joint statement.
This week, with Congress’s most unproductive session in modern memory nearing an end, the House of Representatives will take up an array of measures to deregulate Wall Street – measures for which there is close to zero voter support. If all goes according to its leaders’ plans, the House will debate and approve three separate legislative packages containing dozens of proposals to reverse or impede the financial reforms adopted after the 2008 crisis, or to throw procedural roadblocks of a broader kind in the way of the already slow process of adopting financial as well as health, safety and environmental regulations.
AFR joined forty four organizations in supporting the Department of Labor efforts to update and strengthen the protections that apply when individuals receive advice about their retirement investments.
“One scam is to fire employees of the private equity firm and rehire them immediately as ‘consultants.’ The investors are responsible for consultants’ salaries, where private equity employees are paid out of their own pockets. Another is taking what most private equity investors believe to be part of management fees, things like legal and compliance costs, and billing their investors for them without the investors properly knowing it. A third is private equity firms lying about the valuation methods they use to tell investors about the returns they make each year. All of these are ways for private equity firms to take money from their investors for themselves.”
AFR sent a letter to members of the House Financial Services Committee today asking them to oppose proposed changes to the already anti-regulatory JOBS Act that would further reduce investor protections within the bill.
“It’s absurd to suggest that DOL should step aside to wait and see” if the SEC acts, said Barbara Roper of the CFA. Lisa Donner, executive director of Americans for Financial Reform, added that Congress’ repeated requests for collaboration between the two regulators on their rules “feels like it’s a tactic, and is not grounded in either regulatory or statutory sense.”
“One investment adviser is sick and tired of the financial industry’s threat that mom-and-pop investors will suffer if investment-advice standards are raised,” writes Mark Schoeff of Investment News. At a media briefing in Washington hosted by the Consumer Federation of America, AARP, the AFL-CIO and Americans for Financial Reform, “Sheryl Garrett, founder of the Garrett Planning Network Inc., said that investors with low net worth can be served in a market where all financial advisers must act in their best interests.”
AFR submitted a letter to the SEC expressing deep concern that the rules proposed by the Commission regarding the JOBS Act fail to deliver important investor protections.