How the Wall St.-Washington nexus rips off investors

http://www.ajc.com/weblogs/jay-bookman/2013/nov/04/how-wall-st-washington-nexus-rips-investors/

Jay Bookman
Posted: 10:50 a.m. Monday, Nov. 4, 2013

Would it shock you to learn that something called the "Retail Investor Protection Act," passed in the House last week by a vote of 254-166*, is actually intended to do the opposite and leave the retail investor unprotected and exposed?

If your answer is yes, you would find that shocking, well, there's this great bridge in Brooklyn that just came on the market ....

Here's the situation:

Most people don't realize it, but under current law, stockbrokers and brokerage firms are not legally obligated to look out for the best interests of those who come to them seeking advice. To the contrary, the brokers are free to quietly steer those clients into investments or policies that benefit the brokers themselves at the expense of their clients, through high commissions or fees that they or their brokerage firm collect.

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Research confirms that under the current system, consumers are systematically and unknowingly steered into investments that cost them billions and fatten the paychecks of Wall Street. In more blunt terms, they're being ripped off.

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The Securities and Exchange Commission and the U.S. Labor Department -- as part of its mandate to protect pension and retirement income -- are preparing regulations that would threaten that sweetheart deal. For the first time, brokers would have a fiduciary responsibility to their clients, meaning that they would have to protect their clients' best interests over their own. For the first time, they would operate under the same requirements as certified financial planners.

Not surprisingly, Wall Street does not like that. The Street-backed "Retail Investor Protection Act" that passed the House would make it significantly more difficult if not impossible for the SEC and the Department of Labor to issue those new regulations. (The Obama White House has already threatened to veto the bill, and its prospects in the Senate are questionable. However, sponsors of the bill hope that House passage will frighten off the SEC and Department of Labor.)

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