House subcommittee is considering a measure that would slow the SEC's work to establish a uniform fiduciary standard that would apply to investment advisors and broker-dealers. The measure is just one in a set of recent legislative proposals that would roll back provisions of the Dodd-Frank Act.

Supporters of the draft bills argue that they would create safeguards against burdensome Dodd-Frank regulations. These rules, they say, will have the perverse effect of stifling market activity and even harming investors.

One of the proposals, authored by U.S. Rep. Ann Wagner, R-Mo., would require the SEC to identify and articulate a specific harm to retail investors before imposing new fiduciary obligations on broker-dealers. In addition, Wagner's legislation would require the SEC's chief economist to conduct a thorough study that "assesses the qualitative and quantitative costs and benefits of the rule" before moving forward with the standard. The Dodd-Frank bill authorized, but did not mandate, the SEC to implement a uniform fiduciary rule, which the agency endorsed in a study released in January 2011.

"It seems to me that we have a solution in desperate search of a problem, and the solution could end up harming investors more than helping them," Wagner said. She cited statements from two SEC commissioners who dissented from the Commission's endorsement, both of whom warned that a uniform fiduciary standard could create new areas of confusion in the market and curtail the financial services available to retail investors.

"You don't protect investors by simply restricting their choices and adopting a one-size-fits-all regulatory regime," Wagner said. "In fact, I would submit that this does more harm than good." She said the SEC had provided no evidence to support its claims that investors were being harmed or disadvantaged by the current standards. Nor, she said, did it offer proof that the SEC's proposal would help those investors.

Wagner is also the author of a bill that would prohibit the SEC from establishing rules requiring registered firms to disclose political contributions.

The bills were unveiled at a hearing in May that was convened by the House Financial Services Committee's Subcommittee on Capital Markets and Government-Sponsored Enterprises. Witnesses who testified at the hearing were generally mixed in their reactions to the myriad proposals to curb Dodd-Frank regulations, including Wagner's fiduciary legislation.

Mercer Bullard, an associate professor at the University of Mississippi School of Law, argued that the spirit of a rigorous regulatory analysis—to ensure that new rules do more good than harm—is laudable. But in practice, he argued that Wagner's bill could actually splinter the enforcement landscape by inviting scores of legal challenges that could result in various interpretations of the fiduciary responsibilities for financial professionals.

"Fiduciary claims are the most common claim in FINRA arbitration proceedings," Bullard said. "When you take away the SEC's ability to define a fiduciary duty, you guarantee that there will be dozens of versions of fiduciary duty promulgated by dozens of sources of authority," he added. "Excessive cost-benefit [analyses] of the standard ultimately promote the development of non-uniform enforcement-based law."

The Financial Planning Coalition, an umbrella group that advocates for a uniform fiduciary standard, warned in a statement that Wagner's bill "could add a roadblock to implementation of a key Dodd-Frank provision" with requirements that "frustrate any ongoing efforts to increase standards of care for financial professionals."

Damon Silvers, the AFL-CIO's director of policy and special counsel, was more blunt in his opposition to Wagner's bill. He cited the current regulatory gap that he says holds broker-dealers to an insufficient standard of accountability.

"Currently brokers have no legal duty to give investors advice that is actually in the client's interest," Silvers said. He added that each of the legislative proposals that the capital markets subcommittee is considering "is wrongheaded in its own peculiar way."

Wagner's fiduciary proposal is still only a discussion draft. But the subcommittee also weighed in on three other bills that members have already formally introduced.

One of those bills, the Small Business Capital Access and Job Preservation Act, would exempt advisors to private equity funds that aren't excessively leveraged from having to register with the SEC as required by the Dodd-Frank Act. Supporters of the measure argue that the private-equity field does not pose any systemic risk to the financial sector, and that imposing SEC oversight on fund advisors could dry up capital investment.

"It's important to note that private equity funds did not cause the financial crisis," said Rep. Robert Hurt, (R-Va.), the sponsor of the legislation. "By eliminating unnecessary regulation, this bill seeks to expand capital formation."

Further, the type of investor that plays in private-equity markets is of a very different profile than the retail customers the SEC has in mind with its fiduciary rule for broker-dealers, according to Marc Reich, president of Ironwood Capital, who testified on behalf of the Small Business Investor Alliance. "Our investors are not individuals, they are large financial institution," Reich said. "It's not Ma and Pa Kettle showing up with their savings in a coffee can asking to invest in private equity."

Another bill before the subcommittee would repeal the Dodd-Frank requirement that publicly traded companies report executive compensation alongside their financial performance in annual proxy statements. It would also repeal the provision mandating that SEC filings must contain a ratio expressing the CEO's compensation relative to the median employee salary.

The third bill would bar the Public Company Accounting and Oversight Board from stipulating that companies enlist a specific firm for an audit, or that they routinely rotate auditors to ensure independence and objectivity. The Board had originally proposed these rules in August 2011.

"This is an example where the PCAOB has left its field of regulation and gotten into corporate governance," said Thomas Quaadman, vice president of the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce. This group, the country's leading business lobby and a forceful opponent of Dodd-Frank, is now supporting the proposed measures to limit the bill's regulatory sweep.