From Card Fees to Mortgages, a New Day for Consumers
But ultimately, negotiators compromised and agreed to have the commission first conduct a six-month study of the brokerage industry, looking at, among other things, whether there are any regulatory gaps or overlaps in regulation of brokers and investment advisers. Advisers are already required to put their clients’ interests ahead of their own, while brokers must only recommend investments that are deemed “suitable,” based on factors like their clients’ financial goals and tolerance for risk. “It is now going to be incumbent on Chairman Shapiro to stay on top of this,” said Barbara Roper, director of investor protection at the Consumer Federation of America, “to ensure that this is an unbiased study and that any rules that are proposed are strong and really provide the full fiduciary duty that investors are entitled to.”
But there are no guarantees.
EQUITY INDEXED ANNUITIES These annuities are complex financial products that promise a minimum return on your investment. But they often require you to tie up your money for long periods of time and charge hefty surrender fees if you need to pull out your money early. Unscrupulous salesmen, who collect lucrative commissions, have used deceptive marketing techniques to sell these products to senior citizens, which is why sales of these annuities have been the subject of many lawsuits.
But a provision in the legislation will prevent the S.E.C. from regulating them, a step backward, consumer advocates and the commission have argued, from what is now the case. The S.E.C. had adopted a rule to regulate these annuities as securities, but it had not yet been enacted. Now, the annuities would be treated as insurance products, which means they would be overseen by state insurance regulators.
“That means no securities antifraud authority, no rules against excessive compensation, and no securities regulators to help police the market for these abuses,” Ms. Roper said. “And there are no guarantees that the people who sell them know any more about the securities markets these products are based on than the people who buy them.”
Consumer advocates also said the amendment language is broadly written, which could allow products similar to equity indexed annuities — or those that have characteristics of both investments and insurance — to skirt S.E.C. regulation as well.