About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

92 Tul. L. Rev. 339 (2017-2018)

handle is hein.journals/tulr92 and id is 371 raw text is: The Other Securities Regulator: A Case Study in Regulatory Damage Anita K. Krug* Although the Securities and Exchange Commission is the primary securities regulator in the United States, the Department of Labor also engages in securities regulation. It does so by virtue of its authority to administer the Employee Retirement Income Security Act (ERISA), the statute that governs the investment of retirement assets. In 2016, the DOL used its securities regulatory authority to adopt a rule that, for the first time, designates securities brokers who provide investment advice to retirement investors as fiduciaries subject to ERISA's stringent transaction prohibitions. The new rule's objective is salutary, to be sure. However this Article shows that, by way of its reformation of many advisers' relationships with their retirement-investor customers, the 'fiduciary rule imperils retirement investors in ways that are not immediately evident and that other scholars have not noticed. First, the rule promotes a particular investment strategy-namely, passive investing-for all retirement investors, regardless of their individual needs or objectives. Second, as a thought experiment demonstrates, the rule portends a constriction ofmost retirement investors'participation in the securities markets and a still-wider gap, in terms of investment opportunities and performance, between these investors and their sophisticated counterparts. Despite these dificulties and speculation that the Trump administration would scuttle the rule, moreover the rule's effects are likely enduring. Given the damage that the fiduciary rule threatens to inflict on retirement investors, the DOL's adoption of it is an episode of failed rulemaking-one that, as this Article contends, may be traced to doctrinal factors: US. securities regulation is based on the notion that regulation should be neutral as among firms' business and financial objectives and should harness, without necessarily abolishing, financial professionals' conflicts of interest. Yet with its fiduciary rule, the DOL has effectively forsaken the principle of neutrality and deployed a scorched earth strategy against conflicts. With a view toward addressing the special concerns that shared regulatory authority creates, the Article delves into the lessons arising fivm this episode and how policymakers might better promote regulatory objectives and sound policy going forward. I. INTRODUCTION. ................................ ......340 II. SECURITIES REGULATION BY ANOTHER NAmE .................350 A. ERISA and the DOL's Rules ..................351 B. The Fiduciary Rule......... ..... ...............356 II. REGULATORY DAMAGE .......................... .....361 A. The DOL's Investment Strategy .......... .....362 1. Passive Management ............... .....363 * C 2017 Anita K. Krug. Interim Toni Rembe Dean and Professor of Law, University of Washington School of Law. The author thanks the participants at the 2016 Investment Funds Roundtable at Boston University for their comments on prior drafts of this Article or the topics it addresses. 339 29 VA. Envtl.L.J. 237

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most