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Anti-Fiduciary Bill Meant 'to Send a Signal'

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WASHINGTON -- The push in Congress to derail the Department of Labor's fiduciary proposal might never make it into law -- but that's not really the point.

Rep. French Hill (R-Ark.), a member of the House Financial Services Committee and an ardent opponent of the DoL's initiative, said Thursday that the attempt to block the department from finalizing the fiduciary rules is more about sending a message of opposition and, hopefully, bringing political pressure to bear on the officials working on the proposal.

"Many bills that get introduced into Congress are bills to send a signal," Hill said in an address here at FINRA's conference.


The legislation to quash the Labor Department's proposal to extend fiduciary responsibilities to advisors working in the retirement space -- authored by Rep. Ann Wagner (R-Mo.) -- counts 18 co-sponsors, all Republicans, including Hill. The bill would bar Labor from advancing its fiduciary rules until the SEC took action on a separate consideration of fiduciary duty that would apply to brokers and advisors.

Supporters of the DoL proposal argue that it is a needed protection for investors, who too often receive conflicted advice as they plan for retirement. As the SEC has yet to even issue a proposal for a uniform fiduciary standard, they see Wagner's bill -- which passed the House with some bipartisan support in the last Congress -- as a transparent attempt to stall the proceedings at Labor.

Hill is urging his colleagues to take up the bill and bring it to the House floor, though he acknowledges that any momentum that builds behind the legislation will likely serve more as a marker than anything else.

"I don't think that Rep. Wagner's bill is on a track faster than the Department of Labor," he says. "I do think it sends a signal ... to the Department of Labor that Congress doesn't think this is the right way to go."


Hill also weighed in on another contentious industry issue, calling for FINRA to begin examining investment advisors, just as it does with brokers.

"I think FINRA should have that responsibility," Hill says. "Why? They have an excellent network of offices across the country," as well as an existing mechanism for funding exams through user fees, he says.

Regulatory oversight has moved to the back burner in Congress, despite the advocacy efforts from some industry groups and continued warnings from the SEC that it is unable to effectively oversee the advisors under its purview. Hill agrees, calling the 10% of registered advisors that the commission is able to examine in a given year "a low number."

"As opposed to expanding an already bloated SEC," Hill says, FINRA could leverage its existing network of examiners to review advisors.

That concept came up for debate three years ago, when the Financial Services Committee was considering legislation to authorize the SEC to name a self-regulatory organization -- widely assumed to be FINRA -- to assist with advisor exams.

Critics of that proposal have argued that FINRA's approach to examinations is ill-suited to advisors, and that the best path forward is to authorize the SEC to collect user fees to expand its own exam program, or to increase the agency's budget.

One of those groups, the Investment Adviser Association, quickly responded to Hill's comments, issuing a statement saying that it "strongly opposes the SRO model."

"That model would impose an unnecessary new layer of regulation and bureaucracy on advisors far beyond what is necessary to increase examinations," says Neil Simon, the IAA's vice president for government relations, "while introducing all of the other drawbacks of an SRO."

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