29–006 

113TH CONGRESS REPT. 113–228 " ! HOUSE OF REPRESENTATIVES 1st Session Part 1 

RETAIL INVESTOR PROTECTION ACT 

SEPTEMBER 25, 2013.—Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 2374] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 2374) to amend the Securities Exchange Act of 1934 to 

provide protections for retail customers, and for other purposes, 

having considered the same, report favorably thereon with an 

amendment and recommend that the bill as amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Retail Investor Protection Act’’. 

SEC. 2. STAY ON RULES DEFINING CERTAIN FIDUCIARIES. 

After the date of enactment of this Act, the Secretary of Labor shall not prescribe 

any regulation under the Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1001 et seq.) defining the circumstances under which an individual is considered a fiduciary until the date that is 60 days after the Securities and Exchange 

Commission issues a final rule relating to standards of conduct for brokers and dealers pursuant to the second subsection (k) of section 15 of the Securities Exchange 

Act of 1934 (15 U.S.C. 78o(k)). 

SEC. 3. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934. 

The second subsection (k) of section 15 of the Securities Exchange Act of 1934 (15 

U.S.C. 78o(k)), as added by section 913(g)(1) of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (12 U.S.C. 5301 et seq.), is amended by adding at the 

end the following: 

‘‘(3) REQUIREMENTS PRIOR TO RULEMAKING.—The Commission shall not promulgate a rule pursuant to paragraph (1) before— 


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‘‘(A) identifying if retail customers (and such other customers as the Commission may by rule provide) are being systematically harmed or disadvantaged due to brokers or dealers operating under different standards of conduct than those standards that apply to investment advisors under section 

211 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-11); and 

‘‘(B) identifying whether the adoption of a uniform fiduciary standard of 

care for brokers or dealers and investment advisors would adversely impact 

retail investor access to personalized investment advice, recommendations 

about securities, or the availability of such advice and recommendations. 

‘‘(4) REQUIREMENTS FOR PROMULGATING A RULE.—The Commission shall publish in the Federal Register alongside the rule promulgated pursuant to paragraph (1) formal findings that such rule would reduce the confusion of a retail 

customer (and such other customers as the Commission may by rule provide) 

about standards of conduct applicable to brokers, dealers, and investment advisors. 

‘‘(5) REQUIREMENTS UNDER INVESTMENT ADVISERS ACT OF 1940.—In proposing 

rules under paragraph (1) for brokers or dealers, the Commission shall consider 

the differences in the registration, supervision, and examination requirements 

applicable to brokers, dealers, and investment advisors.’’. 

PURPOSE AND SUMMARY

The Securities and Exchange Commission (‘‘SEC’’) regulates the 

conduct of broker-dealers and investment advisers under the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) (15 U.S.C. 78a et 

seq.) and the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’) 

(15 U.S.C. 80b–1 et seq.), respectively. Section 913 of the DoddFrank Wall Street Reform and Consumer Protection Act (the 

‘‘Dodd-Frank Act’’) (Pub. L. No. 111–203) required the SEC to conduct a study of the different legal standards of care broker-dealers 

and investment advisers owe their retail customers, and authorizes 

but does not mandate that the SEC, in its discretion, issue rules 

to harmonize these standards of care. 

Pursuant to the Employee Retirement Income Security Act of 

1974 (‘‘ERISA’’) (29 U.S.C. 1001 et seq.), the Department of Labor 

(‘‘DOL’’) is authorized to define when a person, including an investment adviser registered with the SEC, becomes a ‘‘fiduciary’’ under 

ERISA by reason of providing ‘‘investment advice’’ for a fee or other 

compensation with respect to ERISA benefit plans or plan participants. 

To promote coordination between the DOL and the SEC, and to 

reduce the potential for conflict among any related regulations, 

H.R. 2374, the ‘‘Retail Investor Protection Act,’’ would prevent the 

DOL from exercising its authority under ERISA to issue a final 

rule defining the circumstances under which an individual is considered a fiduciary until 60 days after the SEC issues a final rule 

relating to standards of conduct governing broker-dealers under 

Section 15(k) of the Exchange Act. In addition, to ensure that any 

SEC rulemaking regarding changes to the standards of care governing broker-dealers and/or investment advisers is necessary, H.R. 

2374 would amend Section 15(k) of the Exchange Act to prevent 

the SEC from issuing any rule without first finding that retail customers are being systematically harmed or disadvantaged due to 

broker-dealers operating under different standards of care than 

those applicable to investment advisers. 

BACKGROUND AND NEED FOR LEGISLATION

Broker-dealers trade securities for their own account or on behalf 

of their customers. Broker-dealers typically charge commissions on 


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the trades they execute for their customers. Investment advisers 

provide advice to clients about the value of securities and the advisability of investing in, purchasing, or selling securities. Investment advisers typically charge an annual fee from their clients calculated as a percentage of the total assets that they manage. 

Historically, broker-dealers and investment advisers have been 

held to different standards of conduct in their dealings with customers. Broker-dealers are regulated by the SEC and the Financial 

Industry Regulatory Authority (‘‘FINRA’’) under a ‘‘suitability’’ 

standard. FINRA rules require that a broker-dealer, when recommending the purchase, sale, or exchange of any security, must have 

reasonable grounds to believe that the recommendation is suitable 

for the customer given the customer’s financial status and investment objectives. By contrast, investment advisers are regulated directly by the SEC under a heightened ‘‘fiduciary duty’’ standard of 

conduct pursuant to the Advisers Act. Under this fiduciary duty 

standard, investment advisers owe to their clients the affirmative 

duty of ‘‘utmost good faith, and full and fair disclosure of all material facts,’’ as well as an obligation ‘‘to employ reasonable care to 

avoid misleading’’ their clients. 

Although broker-dealers and investment advisers are generally 

subject to different standards of care, they both provide a wide variety of often similar services to their customers. In 2008, the SEC 

released a study finding that broker-dealer and investment adviser 

firms take ‘‘many different forms and [offer] a multitude of services 

and products,’’ and that, partly as a result of this ‘‘diversity of business models and services, investors typically fail to distinguish 

broker-dealers and investment advisers along the lines that federal 

regulations define.’’ Based on this blurred distinction regarding the 

differences between broker-dealers and investment advisers, Title 

IX of the Dodd-Frank Act sought to rationalize the regulation of 

broker-dealers and investment advisers and harmonize the regulatory schemes for each. Section 913 of the Dodd-Frank Act required the SEC to report to the House Financial Services and Senate Banking Committees on the standards of care applicable to 

broker-dealers and investment advisers. Section 913 permits—but 

does not require—the SEC to issue rules that address these standards of care. 

The SEC released the staff study mandated by Section 913 on 

January 21, 2011 (‘‘Study’’). In the Study, the SEC staff recommended that both broker-dealers and investment advisers be 

held to a fiduciary standard ‘‘no less stringent than currently applied to investment advisers.’’ The SEC staff made this recommendation because it ‘‘believes that the uniform fiduciary standard and related disclosure requirements may offer several benefits,’’ including heightened investor protection and heightened investor awareness. Notwithstanding its belief that a uniform fiduciary standard would provide benefits, the SEC staff acknowledged 

that ‘‘investors generally were satisfied with their financial professionals,’’ and changing the standards of care ‘‘could lead to increased costs for investors, investment advisers, broker-dealers, 

and their associated persons,’’ although the costs were difficult to 

quantify. The SEC has not yet issued any rules in response to the 

recommendations contained in the Study. 


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In connection with the release of the Study, on January 21, 2011, 

SEC Commissioners Kathleen L. Casey and Troy A. Paredes released a separate statement expressing their view that the SEC 

staff had failed to justify its recommendations. Commissioners 

Casey and Paredes stated that ‘‘the Study does not identify whether retail investors are systematically being harmed or disadvantaged under one regulatory regime as compared to the other and, 

therefore, the Study lacks a basis to reasonably conclude that a 

uniform standard or harmonization would enhance investor protection.’’ In addition, Commissioners Casey and Paredes stated that 

the Study ‘‘does not appropriately account for the potential overall 

cost of the recommended regulatory actions for broker-dealers, investment advisers, and retail investors.’’ On October 23, 2012, SEC 

Commissioner Daniel M. Gallagher echoed the concerns of Commissioners Casey and Paredes, stating that any SEC rulemaking pursuant to Section 913 of the Dodd-Frank Act must ‘‘be supported by 

[SEC] findings that such rules are necessary, as well as a detailed 

understanding and analysis of the economic consequences of such 

rules.’’ 

Imposing a uniform fiduciary standard of conduct on broker-dealers and investment advisers has the potential to disproportionately 

harm the ability of less affluent retail investors to access personalized investment advice from their financial advisers. On September 

13, 2011, Terry Headley, President of the National Association of 

Insurance and Financial Advisers, testified before the Subcommittee on Capital Markets and Government Sponsored Enterprises that ‘‘a wholesale application of the current Advisers Act [fiduciary] duty to broker-dealers would negatively impact product access, product choice, and affordability of customer services for those 

consumers who are most in need of these services.’’ 

It is also unclear at this time whether a fiduciary standard of 

conduct offers a superior level of investor protection compared to 

the standards of conduct applicable to broker-dealers. On May 23, 

2013, Kenneth R. Ehinger testified on behalf of the Association for 

Advanced Life Underwriting before the Subcommittee on Capital 

Markets and Government Sponsored Enterprises: 

While under certain circumstances (such as when a broker has 

discretionary authority over a customer’s account) a broker may be 

held to the legal standard of a ‘‘fiduciary,’’ we believe Advisers Act 

regulation or a broad fiduciary duty standard has not provided superior investor protection for customers of investment advisers and 

would not provide a measurable increase in investor protection for 

retail customers of broker-dealers. 

Mr. Ehinger further testified that a discussion draft of the bill 

that was later introduced as H.R. 2374 would ‘‘require the SEC to 

identify a real need . . . before upending the current standards 

that apply to broker-dealers.’’ 

Furthermore, separate from the SEC’s authority to regulate 

broker-dealers and investment advisers under the federal securities 

laws, the DOL is authorized to define when a person, including an 

investment adviser registered with the SEC, becomes a ‘‘fiduciary’’ 

under ERISA by reason of providing ‘‘investment advice’’ for a fee 

or other compensation with respect to ERISA benefit plans or plan 

participants. These benefit plans include employee pension plans 

and Individual Retirement Accounts (‘‘IRAs’’) which typically invest 


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in securities registered with the SEC. In October 2010, the DOL released for comment proposed regulations broadly defining those 

who would qualify as a ‘‘fiduciary’’ under ERISA. Although the 

DOL withdrew its original proposal, according to its 6 to 12 month 

regulatory agenda released in December 2012, the DOL plans to 

issue a revised proposal in 2013. 

Inconsistent standards promulgated by the DOL and the SEC 

governing retirement plan fiduciaries would likely be confusing and 

costly for investors, and difficult for service providers to follow. On 

May 23, 2013, Thomas Quaadman, Vice President of the U.S. 

Chamber of Commerce Center for Capital Markets Competitiveness, testified before the Subcommittee on Capital Markets and 

Government Sponsored Enterprises: 

Different sets of rules and requirements applicable to 

the same assets will lead to additional costs and complexities for the underlying participants and account holders. 

This issue is further complicated to the extent that an individual may have several accounts at the same financial 

institution, some of which may be only subject to the SEC 

rules, and others of which may be subject to the new 

ERISA requirements as well as the SEC rules. Inconsistent rules will be confusing to investors and problematic 

for service providers to implement. Without coordination 

between the agencies, plan sponsors and plan professionals 

will spend significant resources unnecessarily trying to 

comply with two different sets of rules that are trying to 

reach the same goal. This situation could result in retail 

customers, plan participants, and beneficiaries not receiving the necessary tools and assistance necessary to achieve 

a financially sound retirement at a time when this is critically important, or only receiving such investment support 

at an additional cost. 

Mr. Quaadman further testified that the legislative proposal that 

became H.R. 2374 ‘‘calls for the SEC to coordinate its rulemaking 

on retail customer standards of conduct with other federal agencies, including the DOL, to minimize any conflicts among related 

regulations.’’ 

In a June 18, 2013 letter to the Committee, the U.S. Chamber 

of Commerce wrote in support of H.R. 2374, stating, ‘‘[t]he Chamber believes that this legislation will help ensure that retail investors maintain the ability to choose the type of financial professional 

who best meets their investment needs. Moreover, due to the related nature of the SEC and DOL fiduciary rules, we believe that 

the two agencies should work on a similar timeframe, allowing the 

SEC to finish first, to avoid regulatory conflict or one rule being 

usurped by the other.’’ 

HEARINGS

The Committee on Financial Services’ Subcommittee on Capital 

Markets and Government Sponsored Enterprises held a hearing on 

the legislative text that became H.R. 2374 on May 23, 2013. 


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COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

June 19, 2013, and ordered H.R. 2374, as amended, to be reported 

favorably to the House by a recorded vote of 44 yeas to 13 nays 

(Record vote no. FC–25), a quorum being present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. 

1. An amendment by Rep. Maloney to strike section 3 of the bill 

was not agreed to by a record vote of 26 yeas to 31 nays (Record 

vote no. FC–24). 

RECORD VOTE NO. FC–24 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Hensarling ...................... ........... X ............. Ms. Waters ........................... X ........... .............

Mr. Gary G. Miller (CA) ......... ........... ........... ............. Mrs. Maloney (NY) ................ X ........... .............

Mr. Bachus ........................... ........... X ............. Ms. Vela ́zquez ...................... X ........... .............

Mr. King (NY) ........................ ........... X ............. Mr. Watt ............................... X ........... .............

Mr. Royce .............................. ........... X ............. Mr. Sherman ........................ X ........... .............

Mr. Lucas .............................. ........... ........... ............. Mr. Meeks ............................. X ........... .............

Mrs. Capito ........................... ........... X ............. Mr. Capuano ........................ X ........... .............

Mr. Garrett ............................ ........... X ............. Mr. Hinojosa ......................... X ........... .............

Mr. Neugebauer .................... ........... X ............. Mr. Clay ................................ X ........... .............

Mr. McHenry .......................... ........... X ............. Mrs. McCarthy (NY) .............. ........... ........... .............

Mr. Campbell ........................ ........... X ............. Mr. Lynch ............................. X ........... .............

Mrs. Bachmann .................... ........... X ............. Mr. David Scott (GA) ............ X ........... .............

Mr. McCarthy (CA) ................ ........... X ............. Mr. Al Green (TX) ................. X ........... .............

Mr. Pearce ............................. ........... X ............. Mr. Cleaver ........................... ........... ........... .............

Mr. Posey .............................. ........... X ............. Ms. Moore ............................. X ........... .............

Mr. Fitzpatrick ....................... ........... X ............. Mr. Ellison ............................ X ........... .............

Mr. Westmoreland ................. ........... X ............. Mr. Perlmutter ...................... X ........... .............

Mr. Luetkemeyer .................... ........... X ............. Mr. Himes ............................. X ........... .............

Mr. Huizenga (MI) ................. ........... X ............. Mr. Peters (MI) ..................... X ........... .............

Mr. Duffy ............................... ........... X ............. Mr. Carney ............................ X ........... .............

Mr. Hurt ................................ ........... X ............. Ms. Sewell (AL) .................... X ........... .............

Mr. Grimm ............................. ........... X ............. Mr. Foster ............................. X ........... .............

Mr. Stivers ............................ ........... X ............. Mr. Kildee ............................. X ........... .............

Mr. Fincher ............................ ........... X ............. Mr. Murphy (FL) ................... X ........... .............

Mr. Stutzman ........................ ........... X ............. Mr. Delaney .......................... X ........... .............

Mr. Mulvaney ........................ ........... X ............. Ms. Sinema .......................... X ........... .............

Mr. Hultgren .......................... ........... X ............. Mrs. Beatty ........................... X ........... .............

Mr. Ross ................................ ........... X ............. Mr. Heck (WA) ...................... X ........... .............

Mr. Pittenger ......................... ........... X .............

Mrs. Wagner .......................... ........... X .............

Mr. Barr ................................ ........... X .............

Mr. Cotton ............................. ........... X .............

Mr. Rothfus ........................... ........... X .............

2. A motion by Chairman Hensarling to report the bill (H.R. 

2374), as amended, to the House with a favorable recommendation 

was agreed to by a record vote of 53 yeas and 6 nays (Record vote 

no. FC–14). 

RECORD VOTE NO. FC–25 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Hensarling ...................... X ........... ............. Ms. Waters ........................... ........... X .............

Mr. Gary G. Miller (CA) ......... ........... ........... ............. Mrs. Maloney (NY) ................ ........... X .............

Mr. Bachus ........................... X ........... ............. Ms. Vela ́zquez ...................... ........... X .............


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RECORD VOTE NO. FC–25—Continued 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. King (NY) ........................ X ........... ............. Mr. Watt ............................... ........... X .............

Mr. Royce .............................. X ........... ............. Mr. Sherman ........................ X ........... .............

Mr. Lucas .............................. ........... ........... ............. Mr. Meeks ............................. ........... X .............

Mrs. Capito ........................... X ........... ............. Mr. Capuano ........................ ........... X .............

Mr. Garrett ............................ X ........... ............. Mr. Hinojosa ......................... ........... X .............

Mr. Neugebauer .................... X ........... ............. Mr. Clay ................................ ........... X .............

Mr. McHenry .......................... X ........... ............. Mrs. McCarthy (NY) .............. ........... ........... .............

Mr. Campbell ........................ X ........... ............. Mr. Lynch ............................. ........... X .............

Mrs. Bachmann .................... X ........... ............. Mr. David Scott (GA) ............ ........... X .............

Mr. McCarthy (CA) ................ X ........... ............. Mr. Al Green (TX) ................. ........... X .............

Mr. Pearce ............................. X ........... ............. Mr. Cleaver ........................... ........... ........... .............

Mr. Posey .............................. X ........... ............. Ms. Moore ............................. X ........... .............

Mr. Fitzpatrick ....................... X ........... ............. Mr. Ellison ............................ ........... X .............

Mr. Westmoreland ................. X ........... ............. Mr. Perlmutter ...................... X ........... .............

Mr. Luetkemeyer .................... X ........... ............. Mr. Himes ............................. X ........... .............

Mr. Huizenga (MI) ................. X ........... ............. Mr. Peters (MI) ..................... X ........... .............

Mr. Duffy ............................... X ........... ............. Mr. Carney ............................ X ........... .............

Mr. Hurt ................................ X ........... ............. Ms. Sewell (AL) .................... X ........... .............

Mr. Grimm ............................. X ........... ............. Mr. Foster ............................. X ........... .............

Mr. Stivers ............................ X ........... ............. Mr. Kildee ............................. X ........... .............

Mr. Fincher ............................ X ........... ............. Mr. Murphy (FL) ................... X ........... .............

Mr. Stutzman ........................ X ........... ............. Mr. Delaney .......................... X ........... .............

Mr. Mulvaney ........................ X ........... ............. Ms. Sinema .......................... X ........... .............

Mr. Hultgren .......................... X ........... ............. Mrs. Beatty ........................... ........... X .............

Mr. Ross ................................ X ........... ............. Mr. Heck (WA) ...................... X ........... .............

Mr. Pittenger ......................... X ........... .............

Mrs. Wagner .......................... X ........... .............

Mr. Barr ................................ X ........... .............

Mr. Cotton ............................. X ........... .............

Mr. Rothfus ........................... X ........... .............

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee has held hearings and made 

findings that are reflected in this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 2374, among 

other things, prohibits the Secretary of Labor from prescribing any 

regulation under the Employee Retirement Income Security Act of 

1974 defining the circumstances under which an individual is considered a fiduciary until 60 days after the Securities and Exchange 

Commission issues a final rule governing standards of conduct for 

brokers and dealers under specified law. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 


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COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, July 9, 2013. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2374, the Retail Investor 

Protection Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

ROBERT A. SUNSHINE

(For Douglas W. Elmendorf, Director). 

Enclosure. 

H.R. 2374—Retail Investor Protection Act 

H.R. 2374 would prohibit the Secretary of Labor from finalizing 

a regulation related to certain investment advisors until the Securities and Exchange Commission (SEC) issues a final rule setting 

standards of conduct for brokers and dealers of securities. The regulation that would be delayed by the bill will define the circumstances under which an individual is considered to be a fiduciary when providing investment advice to retirement and other 

employee benefit plans and their participants. Under current law, 

the SEC has been authorized to develop regulations that establish 

the same standards of conduct for brokers and dealers that are already in place for investment advisors when providing advice to 

persons who use the information for personal reasons. 

Based on information from the SEC and the Employee Benefits 

Security Administration (EBSA), CBO estimates that implementing 

H.R. 2374 would not have a significant effect on federal spending. 

The EBSA plans to propose a new rule related to fiduciary standards for advisors of retirement and employee benefit plans but has 

not published a schedule for implementation. Therefore, adding a 

contingency—that the SEC act first—may delay the timing of a 

final rule from the EBSA, but at no additional cost to the agency. 

The SEC staff has recommended that the commission develop a 

rule to harmonize standards of conduct for brokers, dealers, and investment advisors; to that end, the commission has issued a request for additional data and other information on the topic. CBO 

expects that implementing the provisions of H.R. 2374 would not 

significantly change the SEC’s workload. Enacting H.R. 2374 would 


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not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply. 

H.R. 2374 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

The CBO staff contacts for this estimate are Susan Willie and 

Sheila Dacey. The estimate was approved by Theresa Gullo, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 2374 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(j) of H. Res. 5, 113th Cong. (2013), the 

Committee states that no provision of H.R. 2374 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included 

in any report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or a program 

related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(k) of H. Res. 5, 113th Cong. (2013), the 

Committee states that H.R. 2374 requires no directed rulemaking. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This Section cites H.R. 2374 as the ‘‘Retail Investor Protection 

Act.’’ 

Section 2. Stay on rules defining certain fiduciaries 

This section prevents the DOL from exercising its authority 

under ERISA to issue a final rule defining the circumstances under 

which an individual is considered a fiduciary until 60 days after 


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the SEC issues a final rule relating to standards of conduct governing broker and dealers under Section 15(k) of the Exchange Act. 

Section 3. Amendments to the Securities Exchange Act of 1934 

This section amends Section 15(k) of the Exchange Act, as added 

by section 913(g)(1) of the Dodd-Frank Act, to prevent the SEC 

from issuing any rule related to the standards of conduct governing 

brokers and dealers without first identifying (i) if retail customers 

are being systematically harmed or disadvantaged due to brokers 

or dealers operating under different standards of conduct than 

those standards applicable to investment advisers; and (ii) whether 

the adoption of a uniform fiduciary standard of care for brokers or 

dealers and investment advisors would adversely impact retail investor access to personalized investment advice, recommendations 

about securities, or the availability of such advice and recommendations. 

This section requires the SEC, in connection with promulgating 

any rule governing the standards of conduct applicable to brokers 

and dealers, to publish in the Federal Register alongside the rule 

formal findings that such rule would reduce the confusion of a retail customer about standards of conduct applicable to brokers, 

dealers, and investment advisors. 

This section requires the SEC, in connection with proposing rules 

governing the standards of conduct applicable to brokers and dealers, to consider the differences in the registration, supervision, and 

examination requirements applicable to brokers, dealers, and investment advisors. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

SECURITIES EXCHANGE ACT OF 1934 

TITLE I—REGULATION OF SECURITIES EXCHANGES 

* * * * * * * 

REGISTRATION AND REGULATION OF BROKERS AND DEALERS

SEC. 15. (a) * * * 

* * * * * * * 

(k) STANDARD OF CONDUCT.— 

(1) * * * 

* * * * * * * 

(3) REQUIREMENTS PRIOR TO RULEMAKING.—The Commission 

shall not promulgate a rule pursuant to paragraph (1) before— 

(A) identifying if retail customers (and such other customers as the Commission may by rule provide) are being 

systematically harmed or disadvantaged due to brokers or 

dealers operating under different standards of conduct 

than those standards that apply to investment advisors 


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under section 211 of the Investment Advisers Act of 1940 

(15 U.S.C. 80b-11); and 

(B) identifying whether the adoption of a uniform fiduciary standard of care for brokers or dealers and investment advisors would adversely impact retail investor access 

to personalized investment advice, recommendations about 

securities, or the availability of such advice and recommendations. 

(4) REQUIREMENTS FOR PROMULGATING A RULE.—The Commission shall publish in the Federal Register alongside the rule 

promulgated pursuant to paragraph (1) formal findings that 

such rule would reduce the confusion of a retail customer (and 

such other customers as the Commission may by rule provide) 

about standards of conduct applicable to brokers, dealers, and 

investment advisors. 

(5) REQUIREMENTS UNDER INVESTMENT ADVISERS ACT OF

1940.—In proposing rules under paragraph (1) for brokers or 

dealers, the Commission shall consider the differences in the 

registration, supervision, and examination requirements applicable to brokers, dealers, and investment advisors. 

* * * * * * * 


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(12) 

MINORITY VIEWS 

We are concerned that H.R. 2374 is yet another attempt by some 

on this Committee to prevent our regulators from protecting the 

average, retail investor when they try to save for retirement. Even 

though some of the roadblocks set up by the bill have been removed, the bill still creates obstacles that the Securities and Exchange Commission (SEC) must navigate to harmonize the standards for broker-dealers and investment advisors. 

While not as restrictive as those in the dangerous cost/benefit bill 

this Committee just considered, the restrictions would still put additional work in the way of establishing rules to stop brokers from 

self-dealing when selling investment products to Main Street. For 

example, the bill will likely require the SEC to do a new study on 

the impact of adopting fiduciary standards on investors—while the 

previous study showed investor confusion, these findings may not 

be sufficient to meet the standards of investor harm and impact on 

choice required in the bill. 

At the same time, the bill would slow the Department of Labor 

(Department) as it seeks to re-issue rules imposing fiduciary responsibilities on advisers serving workplace retirement plans and 

individual retirement accounts (IRAs). The bill would make the Department’s independent authority to protect retirement savers conditional on the SEC issuing their rules. We agree that the Department went much too far when it issued its proposed rule in 2011, 

with potentially serious, unintended consequences. As many of us 

have mentioned in several letters sent to the Department, an 

overbroad fiduciary rule threatens to reduce the availability of advice to individual investors and retirees, particularly for individual 

holders of IRA accounts who have control of their own accounts. 

This bill, however, may go too far, making Department rulemaking 

hostage to rulemaking by the SEC. 

For these reasons, we continue to oppose H.R. 2374 in its amended form. 

MAXINE WATERS. 

MICHAEL E. CAPUANO. 

JOYCE BEATTY. 

RUBE ́ N HINOJOSA. 

GREGORY W. MEEKS. 

AL GREEN. 

KEITH ELLISON. 

MELVIN L. WATT. 

WM. LACY CLAY. 

CAROLYN B. MALONEY. 

STEPHEN F. LYNCH. 


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WAIVER OF CONSIDERATION

H.R. 2374 was also referred to the Committee on Education and 

the Workforce. The chairman of that committee and the chairman 

of the Committee on Financial Services exchanged letters on June 

28 and July 2, 2013, respectively, memorializing a waiver of consideration of H.R. 2374 by the Committee on Education and the Workforce. 


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emcdonald on DSK67QTVN1PROD with HEARINGInsert offset folio 20 here HR228P1.001

COMMITTEE ON EDUCATION 

AND THE WORKFORCE u.s. HOUSE 

2181 RAYBURN 

June 28, 2013 

The Honorable Jcb Hensarling 

Chainnan 

Committee on Financial Services 

U.S. House of Representatives 

Washington, D.C. 20515 

Dear Mr. Chairman: 

WASHINGTON, DC 20515-6100 

I am writing to confinn our mutual understanding with the consideration ofH.R. 2374, 

the Retail Investor Protection Act. Thank 1\)1' 

and the Workforce with to H.R. The committee remains watchful of policy changes 

to programs within 

In the interest of expediting the House's consideration ofH.R. 2374. the Committee on Education 

and the Workforce viill forgo further consideration on this bill. However. I do so with the 

nnderstanding that this route will uot be construed the cOlmn1itl:ee"s 

jurisdictional interest on this bill 01' other 

considered as precedent of matters 

the future. 

your support for the an:Dointll1ent of outside conferees from the COI11Juittec 

on the Workforce should or a similar bill be considered in a conference 

with the Senate. I also of lellers on this matter in the 

Committee Report on consideration of this bill 

on the Honse floor. Thank yO\! for your attention to these matters. 

cc: The Honorable John Boehner 

The Honorable Miller 

The Honorable \Vaters 

l\k Thomas J. Wickham. Jr.. Parliamentarian 
15 


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July 2, 2013 

The Honorable ,John Kline 

Chairman, Committee on Education and the Work!{m,o 

2181 Rayburn House Office Building 

Washington, DC 20515 

Dear Chairman Kline: 

Thank you for your June 28 letter regarding RR 2374, the Retail Investor 

Protection Act, 

I am most decision to (orego consideration ofH,R 2374 so that 

it may move floor, I that although you are waiving 

forma! consideration hill, the Committee on and the Workforce is in no 

way waiving its jurisdiction over subject matter contained in the bill that falls within 

its jnrisdiction, In addition, if a is on this legislation, I will support 

any request that your committee be represented 

I shall be pleased to include letter and t.his leLter in our committee's 

report on 237'1 and in the Record dnring floor consideration ofthe same, 

Chairman 

cc; The Honorable John A. Boebner (via e-maiD 

The Honorable Maxine Waters (via e-mail) 

The Honorable Miller (via e-mail) 

:Mr. Thomas ,,1, tIl', (via 

o