Once again, Congress has shown its true colors, as steps have been taken to prevent the implementation of a universal fiduciary standard in the financial services industry. Despite the clear evidence of recent abuses on Wall Street and studies supporting the need for such a standard, Congress simply reinforces the points discussed in P.J. O’Rourke’s classic, “Parliament of Whores.” Since both Republicans and Democrats suffered significant losses as a result of abusive practices in the financial services industry, Congress is clearly acting to protect the interests of the finanical services industry, stockbrokers and insurance salesmen, rather than the people.
After all, what is so onerous or objectionable about making the financial services industry only recommend products and strategies that are in a client’s best interests? And what do such protests really say about the industry and its current practices? The finanical services industry has countered by saying they only want to preserve the public’s right to choose. So let’s have a national poll and ask the public whether they would rather have a law that requires a financial adviser to always put the client’s interests first, or a law that allows a financial adviser to put the adviser’s interests ahead of the client. I’m not a betting man, but even I would lay some money down in Las Vegas on the outcome of that poll.
The public recently gained some much needed relief from the abuses of the securities arbitration process when the rule was changed to allow investors to choose a panel made up solely of public citizens. While the ongoing denial of an investor’s right to the courts is troubling, at least the new rule prevents the past ruse of an objective arbitration panel, where in truth two of the three members of the panel had pro-industry ties or leanings.
Most people are familiar with George Santayana’s famous quote, that “those who do not remember the past are condemned to repeat it.” Congress obviously took nothing away from the bear markets of 2000-2002 and 2008. The recent actions of Congress clearly indicate that it’s business as usual in Congress, with an ongoing breach of trust as the interests of the special interests groups are being put ahead of the welfare of the public. The message of the 2010 elections has apparently already been forgotten. The current attempt to block much needed protection for investors should be closely monitored, as it may be necessary to send another message in the 2012 elections to those who refuse to protect their constituents.