If there were a “fiduciary” rule requiring pundits to accurately describe a pending bill or regulation to their readers, Slate’s Helaine Olen would be in clear violation of it. (Note: I would vigorously oppose such rule as contrary to free speech!)
Olen’s attempt to rebut my most recent Forbes column -- in which I detailed how the Department of Labor’s pending “fiduciary rule” could be used to muzzle the speech of financial broadcasters such as Dave Ramsey, Suze Orman and Jim Cramer -- not only falls flat, it demonstrates many progressives’ increasing willingness to embrace censorship.
Olen assures her readers that “the Obama administration isn’t coming after Dave Ramsey, Suze Orman, Jim Cramer, or any other personal finance gurus,” but then suggests that maybe it should. After criticizing Cramer and Ramsey’s opinions, Olen concludes, “Now that I think about it, maybe there should be some sort of rule for television and radio financial-advice programs.” Many of the commenters on Olen’s piece give a “booya,” in Cramer’s phrasing, to such government action against financial commentators, and one even calls for their arrest.
“Free speech for me, but not for thee” attitudes are disappointing if not surprising in this era of “microagressions.” But for someone who faults financial professionals for providing what she calls a “lower standard of care,” Olen displays a low standard for reporting on the content of the rule itself and its potential effects.
In its summary, the proposed regulation acknowledges “concerns that the general circulation of newsletters, television talk show commentary, or remarks in speeches or presentations at financial industry educational conferences would result in the person being treated as a fiduciary [14th page of the PDF linked to, and 21940 of last year’s U.S. Federal Register -- the annual digest in which regulations are published].” It then creates a “carveout” that lays out specific conditions media must meet in order not to be regulated as “fiduciaries.”
But the media “carveout” sets a very low bar for communications with individual audience members, such as answering callers’ questions, to be considered “fiduciary” advice. The regulation says that such communicators “could not specifically direct investment recommendations to individual persons, but then deny fiduciary responsibility on the basis that they did not, in fact, consider the advice recipient’s individual needs or intend that the recipient base investment decisions on their recommendations.” Furthermore, the rule states, any “understanding that advice is directed to a specific recipient for consideration in making investment decisions” may trigger fiduciary responsibility.
Olen hangs her hat on the fact that, in her words, “no consumer pays financial advisers on television or the radio for their specific, on-the-air advice.” Yet the rule makes it clear that the advice does not need to be compensated by the investor receiving it to fall under the Labor Department’s jurisdiction. At least six times in the first part of the regulation, the Labor Department states that the rule applies to compensation that is “direct or indirect.” On the 34th page of this section (page 21960 of the 2015 Federal Register), the Labor Department states further that the regulation covers “any fee or compensation for the advice received by the person [giving advice] from any source.”
This phrasing is what Ramsey critic Michael Markey finds so encouraging. It also gives fiduciary rule critic Kent Mason pause, in that the rule could be used to gag Ramsey and others who give financial tips to members of their audience. As I noted in the column, Mason and Markey actually agree that the compensation Ramsey receives from broadcasting and from book sales are enough to define him as a “fiduciary” under the rule.
Such are the perils of the Labor Department claiming authority never granted to it by Congress to bypass the Securities and Exchange Commission, the federal government’s primary investment regulator, and to unilaterally redefine the term “fiduciary” to cover a broad swath of financial professionals. The consequences also include middle and lower-income savers incurring higher costs and losing access to financial professionals.
Moreover, this isn’t necessarily a partisan issue. The rule’s potential effects have alarmed members of both parties in Congress, as demonstrated when 96 House Democrats penned a letter to the Department of Labor expressing concerns about the rule.
As I note in my recent Competitive Enterprise Institute report, the rule conflicts with federal securities laws and common law state court precedents in order to place more in the finance industry under the Labor Department’s jurisdiction.
Do I know for certain the fiduciary rule will be used to go after financial broadcasters? No, and I never said so. But the rule’s own language and experts’ interpretations indicate that it is a real possibility. Members of Congress must step up to protect the ability of their constituents to seek investment guidance from as many sources as they choose.
Now if there were only a fiduciary rule requiring Congress to prevent implementation of harmful regulations…
