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February 25, 2015

Financial Reform Newsletter – February 25, 2015

Financial Reform Newsletter
 
February 25, 2015

Photo: White House Tumblr

Protecting Americans’ retirement savings, security and dignity: President Obama, joined by Sen. Elizabeth WarrenSen. Cory BookerRep. John Delaney and other leaders, announced a very important retirement security initiative this week: ending conflicts of interests and hidden fees when people save for retirement. This common sense rule merely requires brokers and other financial advisers to act in their clients’ best interest rather than their own personal interests when providing retirement investment advice.

 

There is a retirement crisis in America. Too few are saving for retirement and those that do must confront and navigate a bewildering array of complex financial products and services marketed and sold by financial firms. As a result, most Americans who save for retirement turn to brokers and other advisers to help them make the complicated and important decisions necessary to save and invest wisely and appropriately for their retirement. Unbeknownst to the investor, some advisors have incentives to actively work against their clients’ best interest, which can cost them a lot of money, as this video explains.

$17 billion is the amount skimmed out of retirement accounts this way according to the Council of Economic Advisors, as the respected New York Times columnist Neil Irwin explains here.  And, don’t forget, we all pay for this because retirement savings get special tax treatment, as prominent financial commentator Barry Ritholtz discusses here.

 

To end this indefensible and costly practice of brokers putting their economic self-interest above their clients’ best interest, Better Markets, along with six other public interest organizations, have been organizing and fighting in support of the Department of Labor (DOL) proposing a rule for some time, which is what the President endorsed and DOL did this week.  Better Markets’ CEO Dennis Kelleher attended the event on Monday with the President, Sen. Warren, Sen. Booker, DOL Sec. Perez, Rep. Delaney and others. 

 

To learn more about Monday’s event, read Dennis’ discussion of it here. To learn more about the proposed rule and how it will help millions of Americans, get the facts at SaveOurRetirement.org.

 

Holding banks in the UK accountable: One of our recurring themes has been the lack of genuine individual accountability within the financial sector, especially at the Board, executive and supervisor level. Sure, DOJ and the SEC slam minnows from time to time, but the big fish always gets away. This double standard for the powerful and well-connected is not only wrong, but it actually incentivizes more financial crime, as we have noted many times. This has been the case abroad as well.

 

There is no doubt that the public and voters understand this and that it is wrong. Remarkably, their government representatives have not. This may be about to change – at least in the UK.

 

The supervisory authorities at the Bank of England are proposing a regime in which bank board directors who act irresponsibly can be prosecuted, fined and jailed. The pushback from the financial sector in London (referred to as the “City”) has been predictable. Will the authorities hold firm? Perhaps, but it is disturbing that regulators are not even using the tools that they already have in the meantime to weed out the wrongdoing and recklessness that’s already evident.

 

Preventing risks from overseas from coming back to the US like AIG in 2008 and costing US taxpayers billions (“cross-border” regulation): One of the things Better Markets does the most is participate in the rulemaking process. This includes filing substantive comment letters on proposed rules across the range of agencies and departments in an attempt to ensure that the rules implementing the financial reform law are as strong and effective as possible.

 

Our latest comment letter was sent to the International Organization of Securities Commissions (IOSCO) Task Force on Cross-Border Regulation. The comment letter questions the narrow approach of the IOSCO in addressing securities and derivatives cross-border regulation. It also promotes cross-border regulation development to be advanced by both prudential and market regulators where all financial markets relevant for securities and derivatives markets are included in the framework development.

 

Moreover, Better Markets raised the alarm about the lack of discussion by the Task Force about Financial Market Infrastructures (FMIs) in the cross-border dialog and encourages global regulators to give urgent attention to cross-border coordination on FMIs, and especially CCPs and their connection with securities and derivatives regulation.

 

Better Markets In The News

 

Warren Sharply Criticizes Fed Staff Over Dodd-Frank Views: American Banker by John Heltman 2/24/2015

 

Obama Attacks Advisors Selling Snake Oil, Lauds New DOL Fiduciary Rule: Forbes by Ashlea Ebeling 2/23/2015

 

OVERNIGHT FINANCE: Yellen heads to the Hill: The Hill by Kevin Cirilli 2/23/2015

 

Obama Endorses DOL Fiduciary Redraft, Girds for FightThink Advisor by Melanie Waddell 2/23/2015

 

Fight Over Broker Fiduciary Standard Escalates As Gallagher Accuses White House Of “Propaganda”Value Walk by Mark Melin 2/23/2015

 

What Will Be the Legacy of Dodd-Frank Legislation?: Bloomberg TV Betty Liu “In the Loop” 2/20/2015

 

Articles of Interest

 

Obama Proposal Recognizes How Retirement Saving Has Changed: The New York Times “The Upshot” by Neil Irwin 2/24/2015

 

Fiscal Hawks Should Love Cheaper Retirement Plans: Bloomberg by Barry Ritholtz 2/24/2015

 

HSBC and the Problem of Managing Mega Banks: Financial Times 2/23/2015

 

Big Banks Face Scrutiny Over Pricing of Metals: The Wall Street Journal by Jean Eaglesham and Christopher M. Matthews 2/23/2015

 

She Runs S.E.C. He’s a Lawyer. Recusals and Headaches Ensue: New York Times Dealbook by Peter Eavis and Pen Protess 2/23/2015

HSBC Is Too Big to Regulate: Bloomberg View by Mark Gilbert 2/23/2015

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