Dodd-Frank Debated

In a recent news article, “Old Fears Resurface as Lawmakers Confront Basel III, Dodd-Frank Changes,” Donna Borak reported that U.S. lawmakers at a House Financial Services Committee recently addressed whether requirements of the Dodd-Frank Act, combined with tougher international capital and liquidity rules are driving financial institutions overseas.

The article offered dueling perspectives. Rep. Shelley Moore Capito, R-W.Va., told top regulatory officials, "I think failing to examine the aggregate cost of compliance with Dodd-Frank could lead to job losses and, in the worst case, a downgrade of the United States as a financial center

Conversely, Lael Brainard, Undersecretary of the Treasury for International Affairs stated, “There are some who would argue that the United States is moving too fast on financial reform, that we should slow it down, wait to see what other countries implement. I don't agree. By moving first and leading from a position of strength, we are elevating the world's standards to ours."

Borak also quotes Brainard as stressing that in passing Dodd-Frank, that “policymakers were not choosing between stability and growth, as critics charge” The “real point,” she says, “is that we will have much healthier growth if, in fact, we put in place a safe and sound financial system."

I couldn’t agree more, but am sure that the Dodd-Frank debate will continue – especially later this month when the SEC presents to Congress its cost benefit analysis of requiring that broker-dealers be subject to the same fiduciary standard of care as investment advisors. That’s something all investors deserve.

CFA to Congress: Ignore Misleading Industry Arguments and Allow SEC to Proceed with Fiduciary Rule

In January, in response to a requirement of the Dodd Frank law, the SEC delivered a report to Congress recommending that broker-dealers be subject to the same fiduciary standard of care as investment advisors. However, the SEC delayed imposing the fiduciary rule to conduct a cost benefit analysis. In advance of the SEC’s planned July meeting to address those findings, advocates for imposing a universal fiduciary duty are urging the SEC to enact the rule.

Notably, the Consumer Federation of America’s (CFA) Director of Investor Protection Barbara Roper recently wrote to U.S. House members urging them not to be swayed by misleading arguments from a small segment of the broker-dealer community. In her letter, Roper contested the view set forth mainly by brokers whose business model depends on the sale of high-cost variable annuities, that imposing a universal fiduciary standard could have “unintended consequences” for middle income investors.

Roper wrote, “The SEC has proposed a way to move forward on fiduciary duty that maximizes investor protections while minimizing industry disruption. In doing so, it has won broad support from industry and investor advocates alike. It would be tragic if opposition from a few industry members intent on maintaining the status quo were able to derail that progress. Despite the self-interested claims of certain industry members, it is the middle income investors who must make every dollar count who are most in need of these enhanced protections.”

I couldn’t agree more. I am proud that the Bernhardt Wealth Management team serves our clients as a fiduciary and look forward to the day when all investors can be confident that all financial advisors act only in their clients’ best interests.