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Congresswoman Maxine Waters

Representing the 43rd District of California

Opening Statement: Hearing on "Ensuring Appropriate Regulatory Oversight of Broker-Dealers and Legislative Proposals to Improve Investment Advisor Oversight"

January 11, 2013
Committee Remark

Thank you, Chairman Garrett, for holding this hearing this morning.

Improving the regulation of brokers, investment advisors and other financial professionals was a central goal of Dodd-Frank, and is crucial to ensuring that families are protected as they save for retirement, their children's education, or to buy a home.

Research indicates that the average, unsophisticated retail investor often does not understand the differences between investment advisers and broker-dealers.  In fact, investors unsurprisingly expect their financial advisers to act in their best interest, regardless of the technical legal standard they may be held to.  So as the lines between broker-dealers and investment advisers have blurred in recent decades, improving consumer protection has become increasingly important.

For this reason, I applaud the SEC for recommending, in their section 913 study, that broker-dealers and investment advisers should both be subject to a fiduciary duty standard when they render investment advice to retail customers.  And I am pleased that many of the industry witnesses here today agree with me, the SEC and investor advocates that this is the appropriate approach.

Given the widespread agreement on this point, I think that differences in approaches can be worked out during the rulemaking process, and there is no need to stop rulemaking in its tracks, as some of my colleagues have suggested.  

Finally, I would caution against delegating more responsibilities out to a self-regulatory organization (SRO) when it comes to investment advisers.  I would agree with today's witness from the Consumer Federation for America in saying that "as a general principle, I believe in funding government agencies to do their jobs rather than farming out those responsibilities to private entities."  It is essential that we provide the SEC – our "cop on the beat for Wall Street" – with the funding it needs to do its job.

But with that said, I am interested to hear the witnesses' comments on Chairman Bachus' bill and how an investment advisor SRO might work.

[Also, I ask unanimous consent that a statement from the Project on Government Oversight, and an article by Mercer Bullard, associate professor of law at the University of Mississippi School of Law, be entered into the hearing record]

Thank you, Mr. Chairman, I yield back.