Sunday, June 5, 2016

Something to Know - 5 June

Rob Rogers

Take a few minutes and try and think of history and political science classes 50 years from now, and how the political mess we are now in will be described to the students.   Funny?  Tragic?...or just a transition to something of which we do not know.   In that mindset, check out this piece in today's NY Times....Really.... !!    Regulations that require investment advisers to act in the best interest of their clients are being pushed and lobbied against.   The ethics and morality of it all is lost to me.   I'll be off for a few days as Lynne and I will be discovering the history and wonders of the Channel Islands off of Santa Barbara:

SundayReview | EDITORIAL
Investor Protections in the Cross Hairs

You would think the financial industry would be too embarrassed to object to the idea that advisers should act in their clients' best interests when giving advice and selling investments for retirement accounts. But last week industry groups filed two federal lawsuits against new rules that say just that.

A best-interest standard, also known as a fiduciary duty, would end the common industry practice of steering clients into high-priced strategies and products, even when comparable lower-cost options are available. Such steering generates an estimated $17 billion a year in excessive fees and inflated commissions, a bundle the industry is desperate to preserve.

The groups' legal arguments are vacuous. For example, the rules require advisers to disclose compensation, incentives or conflicts of interest that might induce them to recommend one strategy or product over another. That is basic disclosure for a fiduciary. But one suit says such disclosure would violate advisers' right to free speech by forcing them to discuss things they would rather not discuss.

The lawsuits also argue that the rules, issued by the Labor Department in April, are based on a misinterpretation of the law on fiduciary duty. That is a stretch. It ignores the fact that earlier interpretations, advanced during the deregulatory heyday of recent decades, have effectively condoned biased advice and undisclosed conflicts to the detriment of ordinary investors. It also ignores a provision in the Dodd-Frank financial reform law of 2010 that specifically called for regulators to study such problems and issue new rules to rein in brokers and investment advisers.

The lawsuits are flawed, but they still pose a threat. They could delay the rules' phase-in, which is set to begin next April. One of the lawsuits was filed in a Federal District Court in Texas, in the Fifth Circuit, which is traditionally industry-friendly. The major groups pressing the case, including the U.S. Chamber of Commerce, are in Washington, D.C., but the chamber included in the case a few affiliates in Texas to justify filing there. The second suit was filed in Washington.

The Obama administration developed the best-interest rule with open debate and careful revisions to address legitimate industry concerns. In its last months, the administration will need to bring legal firepower to the effort. The industry's case is wrong on the merits, but it could run out, and then turn back, the clock.

Donald Trump aids and abets violence.

- An American Story

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