Chairman Hensarling Speaks in Support of H.R. 2374, the Retail Investor Protection Act
October 29, 2013 -
House Financial Services Committee Chairman Jeb Hensarling (R-TX) today delivered the following remarks on the House floor in support of H.R. 2374, the Retail Investor Protection Act:
Mr. Speaker, at a time that the American people deserve and demand that Democrats and Republicans work together to fix real problems in our nation today, this body has the opportunity to do just that.
Today the House will consider H.R. 2374, the Retail Investor Protection Act. The bill has strong support from both Democrats and Republicans. In fact, it passed the Financial Services Committee earlier this year on a strong bipartisan recorded vote including half of our committee’s Democrats.
H.R. 2374 will ensure that hard-working families and individuals throughout our country who are trying to save for their retirements, save for their children’s college education, saving for their first home, are not harmed by confusing, costly, regulations coming out of Washington.
Mr. Speaker, all Americans know that a flood of Washington red tape has hurt our economy. That’s why tens of millions of our fellow countrymen remain either unemployed or underemployed. Unfortunately, even more regulations are on the way.
Specifically today, Mr. Speaker, we are speaking about the Securities and Exchange Commission and the Department of Labor who are headed toward proposing two massive and inconsistent rulemakings that are going to hurt the ability of retail investors to get financial advice that they need for their portion of the American dream.
Mr. Speaker, retail investors are not big-time professionals on Wall Street. Retail investors had no role in causing the financial crisis and they should not be punished for it, which regrettably this rulemaking could do. Rather, retail investors are ordinary, hard-working citizens from all of our congressional districts who buy and sell securities for themselves, their families and their futures -- not for a company.
And in this struggling economy, the people who need it most, what are the SEC and the Department of Labor planning to do? They’re planning to make it harder and more expensive for these Americans to get the financial advice that they both want and need.
Perhaps even more incredibly, the SEC is moving forward with this new regulation even though the agency has failed to provide any evidence that it would better protect investors. So, the SEC is going to apparently “regulate first, ask questions later.”
That makes no sense for millions of struggling Americans trying to save for the future.
Mr. Speaker, again, we know millions of middle class families are sitting around their kitchen tables struggling to save and invest in order to make ends meet. Every day, millions of them turn to financial professionals for advice. And yet, here comes from Washington regulations that will make that advice either unavailable or unaffordable -- so fewer Americans will get the advice they need. That’s unfair.
Let me provide you with just a couple of examples, Mr. Speaker. Under the current suitability standard, an investor can have an account with a low-cost, online broker with whom he or she can both make trades and get investment advice. Due to technological advances, and the relatively low cost associated with operating an online platform, these brokers can offer trade and investment advice for as little as seven dollars. But should a fiduciary standard be applied to these online brokers, the impact on investors could be one or all of the following: higher fees per trade, higher fees for investment advice, or brokers may simply stop providing this investment advice to less affluent customers altogether. That is not fair.
Take the example of the single mother who supports her mother and wants to save for her daughter’s college education. She has finally saved enough money to open up an IRA with $2,000 in savings. But we know that should these rules continue to be promulgated with these new Washington regulations, well, this lady may be told she now needs $25,000 in order to open up the very same account. Again, Mr. Speaker, patently unfair.
How about a middle-age father who works with a financial professional? He wants the professional to get him access to products and ideas instead of managing his investment portfolio for him. He wants to trade individual bonds, but potential regulations might not allow the financial professional to offer him bonds on a principal basis. So, the result? The father gets worse execution prices and ends up paying a whole lot more for his investments.
Fortunately, one of our colleagues has stepped up to the table. The gentlelady from Missouri, Mrs. Wagner, has introduced a common sense bill – the Retail Investor Protection Act. And I and the rest of the committee who has voted for it congratulate her for her great work. This bill would require the SEC to first consider the potential impacts its proposed regulation will have on investors -- especially those with low and moderate incomes -- who would lose access to personalized investment advice that they need.
Second, the bill would require coordination between the SEC and the Department of Labor. These Washington agencies will have to sequence their rulemakings, with the SEC going first, so there will be no inconsistent rules that end up confusing and costing investors. The Retail Investor Protection Act that we’re debating today will avoid regulatory conflict between the SEC and the Department of Labor. It is as simple as that.
Mr. Speaker, even the SEC itself acknowledges that the cost of its regulation could “ultimately be passed on to retail investors in the form of higher fees or lost access to services and products.” Yet again, unfair.
It’s not what Americans need; it’s not what they deserve, especially as our economy remains in the throes of the weakest, slowest non-recovery of the last 70 years.
Mr. Speaker, I urge my colleagues to pass this bipartisan bill – again, a bipartisan bill that passed with half of the Democrats on the Financial Services Committee choosing to support this common-sense legislation. H.R. 2374 will help struggling American families get the financial assistance they want and deserve.