Investment Professionals

CFA Calls on DOL, SEC, and FINRA to Investigate Potential Brokerage Firm Violations of DOL Conflict of Interest Rule

Potential Violations Related to Implementation of DOL Conflict of Interest (or "Fiduciary") Rule

Washington, D.C. — The Consumer Federation of America sent letters this week to Labor Secretary Alexander Acosta, Securities and Exchange Commission Chairman Jay Clayton, and FINRA President and CEO Robert Cook urging them to investigate potential rule violations related to broker-dealer firms’ improper implementation of the DOL Conflict of Interest (or “fiduciary”) rule.

Since the DOL rule was finalized, industry lobbyists have repeatedly claimed that brokerage firms are responding to the rule by shifting retirement savers into fee accounts when they would be better off in commission accounts, exposing them to increased costs in the process. If true, that would be a clear violation of the DOL rule provisions, as well as parallel requirements under SEC and FINRA standards, requiring firms that offer both fee and commission accounts to recommend the type of account that is best for the customer. It would also clearly violate the DOL rule requirement that compensation for fee and commission accounts alike be reasonable in light of services offered.

“It’s possible that industry lobbyists are simply engaging in their all too familiar misrepresentations of the rule’s impact, and it is important to note that those making this claim have failed to provide concrete evidence to back it up,” said CFA Director of Investor Protection Barbara Roper. “After all, we know that, contrary to their earlier assertions, the vast majority of firms have chosen to continue offering commission accounts under the rule. But if they are right that firms are nonetheless steering retirement investors toward fee accounts when they would be better off in commission accounts, these industry groups are essentially acknowledging that brokerage firms are engaged in widespread and egregious violations of both the DOL rule and securities laws. That allegation is serious enough to deserve an investigation. If true, it reflects, not a problem with the DOL rule itself, as industry lobbyists have tried to suggest, but an enforcement failure on the part of DOL and its fellow regulators at the SEC and FINRA,” Roper added. “We urge these agencies to take quick and forceful action to protect investors from any firms found to be exploiting the DOL rule to profit unfairly at their customers’ expense.”

“Through its non-enforcement policy, the DOL has sent a message to broker-dealer firms that they can flout the requirements of the rule, harming retirement savers while the DOL looks the other way. If firms are inappropriately shifting retirement investors into fee accounts and charging them excessive fees, as industry lobbyists have claimed, there’s no way the Department could conclude that firms are making a good faith effort to comply. This lack of agency enforcement only confirms the need for a strong and independent enforcement mechanism, which only the full rule provides,” said CFA Financial Services Counsel Micah Hauptman.

The letters to Labor Secretary Acosta, SEC Chairman Clayton, and FINRA CEO Cook are available here.

Contact: Barbara Roper, 719-543-9468; Micah Hauptman, 202-939-1004


The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy.