The SEC will never approve a Fiduciary Standard

Reasons the SEC will never approve a Fiduciary Standard…

There has been a lot of discussion in recent months about the Securities and Exchange Commission stepping up to protect investors with a “Fiduciary Standard” of care.  Following a huge volume of fan-fare, the SEC went silent on the use of the term “fiduciary” to define a standard of care. 

Following several inquiries and soliciting opinions from mostly those most at risk should a true fiduciary standard be approved, the final answer for the SEC was to re-define the language typical of most fiduciary issues, calling it instead a “Regulation Best Interest” standard, avoiding the term “fiduciary” in it’s entirety, due to it’s “lack of popularity” with financial institutions.

In response to this lack of SEC legitimacy, proponents of a true fiduciary standard are fighting back.  Many states are defining a fiduciary standard for their respective States, independently of the Department of Labor or the SEC.

Today,  Knut Rostad, president of The Institute for the Fiduciary Standard, said New Jersey has the opportunity to create a stronger best interest standard than the one the Securities and Exchange Commission is currently working on.

“We are on the verge of enacting a suitability-type standard federal rule that holds out as fiduciary,” he said in his testimony. “New Jersey has a unique opportunity to make an important difference in the journey of fiduciary duties in the early 21st century.”

For the un-educated or un-suspecting investor, this rhetoric may sound like a battle between State’s rights and the Feds, not really understanding the  importance of the stance several States are taking in this matter.

One might assume the Feds should automatically do what is right for the taxpayer, the ones paying their salaries, but nothing could be further from the truth.  Companies like Principal Financial Services can’t bribe public officials in all of the States, but they certainly can do so within one or two Federal agencies, like the DOL and the SEC.

The Center for Responsive Politics is a watch-dog organization in Washington, DC, that plays an important role in government.  At least from the average taxpayer’s perspective.

Total monies spent by Lobbyists 1998-2017

Their website, opensecrets.org, reports on the various forms of lobby spending in Washington, D.C., and focuses on corporate spending.  Ruth Marcus, a noted columnist with the Washington Post, has been quoted as saying…“The Center for Responsive Politics has made itself into an essential Washington – actually, make that an essential national – institution.   Now more than ever, with the proliferation of super PACs and 501(c)(4) groups pouring huge sums into campaigns, it’s critical to have a reliable and handy source of information on money and politics.  Opensecrets.org is the go-to site for this data – trustworthy, accessible and well-presented.”

The Principal Financial Group seems to lead the pack in lobbying and  spending in Congress and the regulatory agencies in general.  Their annual lobbying totals between 1998-2018 are reflected in the chart below:

As the following chart shows, 11 out of 14 Principal Financial lobbyists in 2017-2918 previously held government jobs….

Principal Financial Lobbyists 2017-2018

When you examine the numbers, there exists a bottom-less pit of corruption in Washington, DC….. using your dollars to pay agency officials to do their bidding.  It has become a challenge in Washington, DC for lobbyists to compete with other lobbyists for “support” from agencies… I once attended a speech in which a lobbyist was soliciting support from his labor union members for money to pay for support from high level officials in Washington to pass laws favorable to the union.

If you can compete dollar for dollar with the likes of Principal Financial Group for support of an SEC regulation enforcing a fiduciary standard for financial advisors and brokers, when Principal objects to the plan, be prepared to get out your wallet to pay off public officials.

This chart shows the Annual Lobbying on Securities and Investments interests in Washington, DC by all lobbyists between 1998 and 2018..  

Lobbying dollars spent by financial institutions between 1998-2018

As you can tell from the chart, lobbying the SEC and other securities regulators has increased five fold since 1998…. I suspect the majority of these funds go into the pockets of SEC and DOL regulators…. do not expect these “do-gooders” working for the SEC and DOL to have you, the investor’s backside, when it comes to regulating the financial industry.

Principal Life adamantly denies any fiduciary related responsibility as it relates to the so-called management of their client’s monies.  The reason is obvious… under the terms of the Group Annuities they convince your employers to sign, Principal Life “owns all plan assets!”

Under common law, they already own your money, and as such, cannot become a Fiduciary under the existing circumstances.  The broker/dealer and advisors will become fiduciaries if an adequate regulation was on the books at the SEC… and if such a bill is passed, Principal would lose ALL of their advisors over-night…. they would smartly refuse to be responsible for the crimes committed by Principal, with or without their knowledge or consent!

If the SEC would pass a “fiduciary standard” to protect the 401k plan participants, Principal would no longer be able to conduct business as usual, and they would no longer be able to”sell” their worthless proprietary pooled separate account products to their clients.  Principal Life would effectively be ham-strung by such a law, as would dozens of other less-than-honest insurance companies.

For this reason alone, considering the millions of dollars Principal pays to public officials each year, an adequate fiduciary standard will never be approved until the present Trump administration “cleans the swamp” of corruption still existing inside the SEC and the DOL….

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Author: Dennis Myhre

Mr. Myhre can be contacted at..... dmyhre@fiduciaryfactor.com