2017 0713 - GOV (House) - Impact of the DOL Fiduciary Rule on the Capital Markets - Bill Huizenga (R-MI)

  • 2017 0713 - GOV (House) - Impact of the DOL Fiduciary Rule on the Capital Markets, Bill Huizenga (R-MI)  ---  [BonkNote]
    • [PDF-117p,  VIDEO-YouTube]
    • Litigation Risk
    • AARP - Cristina Martin Firvida, Director, Financial Security and Consumer Affairs
    • AAF - Doug HOLTZ-EAKIN, President, American Action Forum -  p62-69
    • ACLI - Mark HALLORAN, Senior Director, Head of Industry and Regulatory Strategy, Transamerica, on behalf of the American Council of Life Insurers - Statement - p57-61
    • House - Committee on Financial Services  - Subcommittee on Capital Markets, Securities, and Investment
  • (p31) - Tom Emmer (R-MN) - I want to focus on one specific area probably because of my professional background. And why don’t we start with Mr. Halloran? Would you agree with Secretary Acosta that the private right of action, the right to sue advisers and their firms, is the biggest flaw with the rule, the DOL rule?
  • ACLI - Mark HALLORAN, Senior Director, Head of Industry and Regulatory Strategy, Transamerica, on behalf of the American Council of Life Insurers - It is certainly, if not the biggest, among the biggest, yes.
  • Tom Emmer (R-MN) - There appears to be some misunderstanding of the litigation risk under the DOL fiduciary rule. Many people say that the litigation risk will not arise until January 1st of 2018, but I have heard this may not be correct. My understanding is that a lack of clarity and certainty regarding the rule has created concern about a very substantial litigation risk for advisers starting on June 9th. Again, Mr. Halloran, can you explain?
  • ACLI - Mark HALLORAN - This doesn’t get a lot of press or publicity, but the actions by class has always been present in ERISA rule.
    • By taking ERISA law and applying that to IRA accounts, as an example, you are now exposing financial advisers even as of June 9th to a potential class-action litigation, because just giving rise to advice of moving out of a 401(k), for example, rolling over to an IRA.
    • So, yes, that is a real and present concern, absent any private right of action that arises from a best-interest contract.
  • Tom Emmer (R-MN) - You believe it is a real concern starting on June 9th?
  • ACLI - Mark HALLORAN - Oh, yes. 
  • ...
  • (p32) - So there is more concern about what we don’t know necessarily than what we do know. We don’t really have case law to look to right now to understand the actual consequences of this private right of action and these kinds of actions. All we can look to is what we see in other businesses. And it is of significant concern.
    • Tom Emmer (R-MN) - And unfortunately, in order to get that body of case law, you are going to have to have a lot of people suffer in courts of law, and you are going to have to pay a lot of attorneys, which I suppose the bar is probably not too disappointed with.
  • (p37) - AARP - Cristina Martin Firvida, Director, Financial Security and Consumer Affairs - There are two additional things that I would just like to add briefly, because we have talked a lot about the litigation risk in this rule. And I would like to make sure that we say today, reminding everyone that the litigation that is permitted in the rule is class-action litigation. And there are two things about that we need to remember.
    • First, there has to be a systemic problem before a class-action cause of action can be brought, and I think that we can all agree that if there is a systemic issue in advice that is being provided, we would want to address that. So this is not about individual rights of action. This is about a systemic problem that affects a class.
    • And second, it is extremely difficult to certify a class, extremely difficult and more so in recent years after certain Supreme Court cases have been decided. So I really just wanted to make sure that we were all clear on what is the scope of the litigation risk.
  • (p39) - Doug HOLTZ-EAKIN, President, American Action Forum - I think the chief concern is not robo-advice. It is choice. People should get the advice which is best suited for them.
    • Trey HOLLINGSWORTH (R-IN) - Right.
    • Doug HOLTZ-EAKIN - And pushing people away from having that choice is what I am concerned about.
    • Trey HOLLINGSWORTH (R-IN) -  It is about choice.
      • What I think Hoosiers back home are most concerned about is that bureaucrats in Washington more and more are telling them what products they can use, what products they should use, and what products are best for their futures and families when they are the ones who know what is best for themselves and their own futures.