Leading consumer and investor advocates today urged the Senate Banking Committee to stand strong in the face of a massive lobbying effort by the insurance industry.
The groups allege the lobbying effort distorts the benefits of requiring all financial professionals who provide investment advice to adhere to the high fiduciary duty standards of the proposed Investment Advisers Act.
In a joint letter to Senate Banking Committee Chairman Christopher Dodd, D-Conn., and Richard Shelby, R-Ala., the AARP, Consumer Federation of America, Fund Democracy and the North American Securities Administrators Association insisted the fiduciary requirement is needed to protect investors from widespread abuses.
The groups also denounced industry efforts to weaken investor-friendly language originally proposed by Dodd to eliminate the broker-dealer exclusion from the Investment Advisers Act.
These efforts have caused significant concern for older investors and their financial security, the groups charged.
The proposal, contained in Section 913 of the Restoring American Financial Stability Act of 2009, is under attack by some members of the broker-dealer and insurance industries.
The 4 organizations urged committee members to resist calls to eliminate Section 913 entirely, as some in the securities and insurance industry have suggested, or to water down its protections by replacing it with a weaker provision advocated by many in the brokerage industry, which some call "fiduciary duty lite"
"Weakening the legislation in this way would harm all investors, but the vulnerable senior population would be hit the hardest," the letter said.
In another development, negotiations have broken down over a bipartisan financial services reform package in the Senate, so Democrats will unveil their own proposal by the end of the month, Dodd said today.
The key issue is apparently the authority to be given a consumer protection unit that both Democrats and Republicans in the Senate Banking Committee believe should be housed within the Treasury Department.
Those leading the efforts to water down the bill include the National Association of Insurance and Financial Advisers; the Association for Advanced Life Underwriting; and the National Association of Independent Life Brokerage Agencies.
In a November letter to members of the Senate Banking Committee, these groups said the provision is "enormously costly" and would have a "counterproductive impact."