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Warren Turns up the Heat on Conflict-of-Interest Rule Critics

Sen. Elizabeth Warren (D-Mass.) is turning up the heat on financial services firms that have opposed the Department of Labor’s (DOL) pending fiduciary regulation.

Having expressed concerns a few weeks ago to Secretary of Labor Thomas Perez and Office of Management and Budget Director Shaun Donovan (whose agency is reviewing the revised version of the rule submitted by the DOL earlier this year), Warren wrote a letter to Securities and Exchange Commission (SEC) Chair Mary Jo White on March 31 asking that the SEC open an investigation into whether financial services providers violated securities laws by misleading investors by making contradictory statements about the impact of the pending rule on their business practices.

Repeating the concerns previously shared with Perez and Donovan, Warren’s letter to White says, “Corporate interests have become accustomed to saying whatever they want about Washington policy debates, with little accountability when their predictions prove to be inaccurate… But the information we have obtained raises questions about how, in this specific case, the companies could have knowingly provided such dramatically different public statements about the impact of the DOL Conflict of Interest Rule — in one example, saying almost simultaneously that the rule would be ‘unworkable’ and that the rule would not be ‘a significant hurdle’ — without misleading investors.”

In case the SEC misses her point, Warren goes on to point out that, “The SEC need not show that investors relied on these untrue statements to prove a violation of the law”… both sets of industry claims — that the proposed rule will harm them and their business model, and that the proposed rule will not harm them and their business model — cannot possibly be true. And if one these public statements is materially false, it would appear to violate long-standing interpretations of our securities laws.”

While Warren expresses hesitancy in making a “direct accusation that these companies have violated the securities laws with their directly contradictory statements about the impact of the DOL Conflict of Interest rule on their business models,” she goes on to tell White that she believes the “circumstances justify initiating a prompt and thorough SEC investigation” — and asks for an investigation to be opened, and a briefing of her staff on how the SEC interprets the securities law with regard to these kind of statements about the impact of pending rules or legislation on business models.