Warren (Again) Quotes Financial Firms in Challenging Fiduciary Rule Delay

By Nevin Adams • September 07, 2017 • 0 Comments
Sen. Elizabeth Warren (D-MA) says that, “Contrary to the alarmist claims of their lobbyists and the conclusions of opaque industry-funded studies,” financial firms are “fully ready” to comply with the fiduciary rule — and you don’t need to take her word for it.

Warren, an early and enthusiastic supporter of the fiduciary regulation, has sent a letter to Labor Secretary Alexander Acosta, reminding him of his May op-ed in The Wall Street Journal in which he had said there was “no principled legal basis to change the June 9 date,” contrasting that to the Labor Department’s August announcement in a court filing to push the applicability date for the full Best Interest Contract Exemption (BICE) full applicability date.

Earnings ‘Reports’

With the rule now partially in effect, Warren has had her staff review the fiscal year 2017 second-quarter earnings calls (all of which, she notes, took place after the impartial conduct standards went into effect on June 9, 2017) for “several dozen financial service companies.” Before turning her attention to the communications on those calls, her letter reminds Acosta (and new Securities and Exchange Commission Chairman Jay Clayton, copied on the letter) that “…publicly traded companies are required by law to accurately share all information pertaining to material matters affecting their business models or stock valuations,” before not-so-subtly noting that, “…the same requirements do not apply to political advocacy or lobbying on this or any other topic.”

“Given that discussions in these earnings calls that relate to the fiduciary rule are presumably truthful and complete accounts of companies’ efforts to comply with the rule and the rule’s effects on their business models and client services, I urge you take note of these comments on the fiduciary rule by financial executives to their investors as you contemplate further delays to the rule.”

She then proceeds to excerpt sentences from transcripts of several earnings calls, organized under the following points:

  • Companies are “well-prepared” for the rule’s implementation

  • Compliance with the rule is not overly burdensome

  • The rule is consistent with their companies’ goals of putting their clients’ interests first

  • Previous delays have caused great uncertainty and further delays would only exacerbate this uncertainty

A ‘Remarkable Contrast’

Warren writes that these financial firms’ statements “…strike a remarkable contrast with what lobbyists of the financial services and insurance industries have said in opposition to the rule in the past,” and, she notes, “…directly contradict the findings of a new study, paid for by the Securities Industry and Financial Markets Association (SIFMA), one of the largest trade associations for the financial industry.” The latter put a $4.7 billion dollar tab on compliance costs associated with the fiduciary regulation.

“I hope you will keep this contrast, and my letter, in mind as you read the forthcoming comments from companies and trade associations about whether to delay the January 1, 2018 implementation date and as you review the industry-funded studies they submit in conjunction with these comments,” she continues.

Not the First Time

This is not, of course, the first time Warren has used financial services firms’ words to make her point. Back in February Warren wrote to the acting Secretary of Labor in a similar format, stating that “delaying implementation of this rule would be a slap in the face to the companies that have invested, in good faith, for a deadline that has stood for the past year,” as well as to “the everyday worker deserving of the assurance that their retirement adviser is working in their best interest.”

Last year she wrote to then-Chairman of the SEC Mary Jo White asking that the SEC open an investigation into whether financial services providers violated securities laws by misleading investors by making contradictory statements about the impact of the pending rule on their business practices.




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