The Republicans rule the House now and all signs show that they can’t wait to make their mark on financial regulatory reform—if they can.
Coming in January will be the report from the U.S. Securities and Exchange Commission on whether to adopt a uniform fiduciary standard.
Knut A. Rostad, chairman of The Committee for the Fiduciary Standard, spoke with me Friday. He pointed out that the Republicans who will arrive to control the House of Representatives are not fans of the Dodd-Frank reform law and probably are particularly enamored with this push to single standard. “So, there will be a different response when [the report] comes to Congress.” At the same time, Rostad said, the new Republican house members—a high percentage of them hailing from the Tea Party—aren’t cheerleaders for Wall Street either.
“Congress is still going to be fairly divided and focused on other issues, so I think that’s going to create a dynamic where what the outcome is uncertain,” Rostad said. “Irrespective of the election, if you look at some of what we’ve heard from the Commission and the input from the industry—the future of the standard is quite uncertain—in terms of how the Commission deals with a number of key issues and to what extent the standard will have so many exemptions and gaps that its impact will be uncertain.” And, he added, “the industry in is in full force making its views known.”
In fact, SIFMA, the trade group for the largest brokerage firms, stated in its October report to the SEC, that “wholesale adoption of the [fiduciary standard from] the Investment Advisers Act of 1940 for all brokerage activity is likely to have a negative impact on consumers, particularly smaller investors, across each of the following dimensions: choice, product access, affordability of advisory services.”
SIFMA, elaborating on its findings, said “the cost of shifting to fee-based pricing alone would reduce expected returns by more than $20,000 over a 20-year horizon.”
As for the new Republican congressional force, Rostad said, “on the list of priorities for Republicans, the standard may not make the top 10 or top 20 but what I think is also fair it makes the top of the list of industry lobbyists.”