As has been made abundantly clear by the ongoing Republican presidential primary, lying about policy is not against the law. But it could be illegal to spin a tale in ongoing national debates, if those fibs mislead people with capital to spend.
Sen. Elizabeth Warren is now asking the Securities and Exchange Commission (SEC) to launch an investigation along those lines, after four corporate executives protested a draft Department of Labor (DOL) rule on conflicts of interest for investment advisers.
Warren wrote SEC Chair Mary Jo White on Thursday, pointing out how doomsayer predictions in four executives’ comment letters on the rule contrasted with other company statements on the matter. She asked the key regulator to look into potential violations of Depression-era securities laws and SEC rules.
“Corporate interests have become accustomed to saying whatever they want about Washington policy debates, with little accountability when their predictions prove to be inaccurate,” Warren said in her letter.
Warren was “hesitant to make a direct accusation,” but claimed to have some evidence of illegal activity. She said “at least one industry insider has informed my staff that investors are closely scrutinizing both sets of statements…in an attempt to assess the rule’s true impact on companies.”
Warren and House Oversight Committee ranking member Elijah Cummings (D-Md.) first highlighted the discrepancies last month in a letter sent to DOL and the White House’s Office of Management and Budget.
In the spring of 2015, the Department of Labor proposed a rule that would require investment advisers to disclose “backdoor payments and hidden fees” and their other clients’ interests. In a press release announcing the move, the Obama administration said dishonest advice costs investors $17 billion annually.
That so-called “Conflict of Interest Rule” is set to be finalized in the coming weeks or months, according to Reuters.
At the center of Warren’s query were comment letters sent in July 2015 by four asset managers to DOL. They claimed the proposed regulation would do serious damage to retirement advisers across the nation. “But in calls with investors made at or around the same time, officials from those companies–or their parent companies–made contradictory statements about the impact of the proposed rule,” Warren said.
The only executive named by Warren in her letter was Dennis Glass, president and CEO of Lincoln National. She also cited three other corporate managers without directly identifying them by name. They are: James Sopha, the president of Jackson National Life Insurance Company; Kent Callahan, the presdient and CEO of Transamerica’s Investment and Retirement Division, and former Prudential Executive Vice President and General Counsel Susan Blount.
Warren said that similar incidents in recent years have led to SEC enforcement actions, after regulators determined investors were led astray.
“For example, in April 2014, the SEC entered into a $20 million settlement with CVS Caremark Corp. based in part on allegations that CVS had ‘misled investors on an earnings call.’” she noted.
The senator also cited a 2010 settlement between the SEC and Citigroup after two of its executives “provided misleading information in investor phone calls about the bank’s subprime mortgage exposure.” The bank and the federal government agreed to resolve the matter for $75 million.
