As I've discussed in recent weeks, Washington legislators and regulators are on a fast track to implement changes this year that will benefit investors.
After previously announcing last week that DOL rules on 401(k) investment advice are being pulled, Employee Benefits Security Administration (EBSA) head Phyllis Borzi stated this week that new rules will be ready for proposal by mid-November. Although Robert Andrews and George Miller of the House Committee on Labor and Education have also been working on legislation that would address investment advice for defined contribution plans, DOL believes it needs to move quickly to implement effective regulation rather than wait for direction from Congress, which is already knee deep in health care and financial regulatory reform. According to Borzi, EBSA is also eager to provide guidance on target date funds this year and to complete a review of plan and fee disclosure rules by early next year.
On the financial reform front, House Financial Services Committee Chair Barney Frank reported he believes a financial regulatory reform bill will be complete before the end of the year. Frank further outlined Congress' timeline on Wednesday during a hearing in which he explained the House Committee will begin to mark up financial reform legislation in pieces beginning in mid-October. However, he is unsure whether the legislation will be considered as a whole package or in parts on the House floor.
Frank intends for his committee to be done marking up proposed new laws by early November and also believes that legislation could pass through the Senate by Christmas. In the meantime, there has been much speculation about whether the fiduciary legislation that appears in the proposed Investor Protection Act of 2009 will be a part of the overall reform package. Although the Act has not yet been listed on the legislative hearing schedule, in this case, no news could very likely be good news.
Congress appears to be focused on addressing some of the more complicated issues first, and has taken steps along with the Administration to scale back legislation that has received the sharpest criticism in order to gain support necessary for passage. The lack of discussion of the fiduciary standard is likely a result of the fact that the proposal to extend fiduciary obligations to all advice givers received widespread support from the SEC and various industry groups over the summer. Indeed, there has since been much speculation that brokers may willingly change their business models to embrace the fiduciary standard.
Moreover, it is clear that the Administration and Congressional members are passionate about securing more consumer and investor protections. While speaking about the proposed Consumer Financial Protection Agency (which would be focused on consumer products such as credit cards) at the House Financial Services Committee hearing on Wednesday, Geithner expressed the need for "strong minimum national standards for protection" and for consumers to understand the risks of products sold to them. These are concepts that easily translate to protections for retail investors who are offered advice by investment professionals, a point likely not lost on policy and lawmakers in Washington.
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