SEC proposal looks to balance brokerage model with concerns over hidden incentives
Brokers won their fight against the controversial fiduciary rule. Now, a battle is brewing over a new proposal by securities regulators that would require them to cut back on sales incentives tied to customer advice.
The battle with the Securities and Exchange Commission will play out in 2019. Major brokerages including Morgan Stanley, Bank of America’s Merrill Lynch and Fidelity Investments are pressing the SEC to let them maintain current broker pay practices, arguing the plan could limit the products and services they provide.
SEC Chairman Jay Clayton, meanwhile, is staking his legacy on changes that would require more broker disclosures and limit sales incentives.
The proposal says that brokers should avoid “compensation incentives for employees to favor one type of product over another” and suggests pay for brokers be based on “neutral factors” such as the amount of time and complexity of the work involved. Brokers claim such a system could put their business model at risk.
.. The industry is hopeful Mr. Clayton’s statements mean the SEC won’t force brokers to eliminate all forms of variable compensation, but instead boost disclosure of pay arrangements and weed out some extreme practices such as sales contests.
.. Most brokerages pay their employees more for selling certain products over others, depending on how lucrative they are. This practice can result in customers paying more for products and services than they need to, though brokers defend the practice as the only way to reasonably offer a range of investment options. Without assurances their pay practices comply with government regulations, investment firms say they could stop offering certain products to avoid possible legal liability... To advocates of a tougher rule, pay incentives call into question whether a product is being presented to a customer for their benefit or for the broker’s.“Brokerage firms artificially create all sorts of perverse incentives to encourage brokers to make certain recommendations that are very profitable for the firm and the broker, even if they aren’t really good for the customer,” said Sen. Elizabeth Warren (D., Mass.) at the December hearing.
At Prayer Breakfast, Guests Seek Access to a Different Higher Power
With a lineup of prayer meetings, humanitarian forums and religious panels, the National Prayer Breakfast has long brought together people from all over the world for an agenda built around the teachings of Jesus.
But there on the guest list in recent years was Maria Butina, looking to meet high-level American officials and advance the interests of the Russian state, and Yulia Tymoshenko, a Ukranian opposition leader, seeking a few minutes with President Trump to burnish her credentials as a presidential prospect back home.
Their presence at the breakfast illuminates the way the annual event has become an international influence-peddling bazaar, where foreign dignitaries, religious leaders, diplomats and lobbyists jockey for access to the highest reaches of American power.
The subculture around the breakfast was thrust into the spotlight last week with the indictment of Ms. Butina, who was charged with conspiring to act as a Russian agent. Her goals, prosecutors said, included gaining access to the breakfast “to establish a back channel of communication” between influential Russians and Americans “to promote the political interests of the Russian Federation.”
.. Ms. Butina’s spy-thriller-like tactics hint at the more widespread, if less sensational, international maneuvering that pervades the prayer breakfast, and the lucrative opportunities it creates for Washington’s corps of lobbyists and fixers, according to more than half a dozen people who have been involved in peddling access around the event.
.. Ahead of Mr. Trump’s first appearance at the breakfast last year, some of the people said, foreign politicians clamored for tickets, with some offering to pay steep fees to get into the event and the myriad gatherings on its sidelines.
One lobbyist, Herman J. Cohen, offered what he billed as an exclusive invitation to last year’s breakfast, and three days of meetings around it, to an African leader for $220,000.
.. “It’s an opportunity,” Mr. Cohen said of the event. “If I go to the prayer breakfast, I have a good chance of maybe shaking the president’s hand or talking to him for two minutes.”
“In a way, it bypasses protocols,” he added, “but in a way, it is taking advantage of people being present in the same venue.” Such invitations to foreign leaders, he said, are “very useful to them back home.”
.. Some describe the gathering as similar to the World Economic Forum, except that Jesus is the organizing principle. The eclectic guest list has included the Dalai Lama, the Rev. Billy Graham, Mother Teresa, the singer Bono and the former Redskins coach Joe Gibbs, as well as the Palestinian leader Yasir Arafat and President Paul Kagame of Rwanda.
.. With its relative lack of diplomatic protocols and press coverage, the prayer breakfast setting is ideal for foreign figures who might not otherwise be able to easily get face time with top American officials, because of unsavory reputations or a lack of an official government perch, according to lobbyists who help arrange such trips. They also contend that it is easier to secure visas when the breakfast is listed as a destination.
.. “You can’t just invite wonderful, exciting, great people,” said Mr. Hall. “Jesus, when he went to dinner, he went to dinner with everybody.”
Trump’s new power couple
She’s a strategic adviser in President Donald Trump’s West Wing. He’s a lobbyist who moonlights as the head of the American Conservative Union, which hosts the annual Conservative Political Action Conference — a key gathering for Trump supporters.
.. Mercedes and Matt Schlapp, a power couple tailor-made for Trump’s Washington... , Mercedes Schlapp — known as Mercy — is among the leading candidates to become communications director after the resignation last week of Hope Hicks... The move, said to be favored by White House chief of staff John Kelly.. Other internal candidates under consideration include Treasury spokesman Tony Sayegh and press secretary Sarah Huckabee Sanders, who could take on a dual role, as her predecessor, Sean Spicer, did... Schlapp, a former Fox News contributor.. Schlapp is also well-liked by the president, in part because her husband is so often on television defending him... A veteran of the George W. Bush White House and the Koch brothers’ Washington operation, Matt Schlapp was elected chair of the American Conservative Union.. “Matt has successfully been representative of the conservative movement and been able to defend Trump without looking like a sycophant.. in 2017, when Schlapp invited alt-right provocateur Milo Yiannopoulos.. This year, the conference hosted a range of speakers from what were once the fringes of the Republican Party, and even hosted French nationalist Marion Le Pen.
.. “The sort of personality cult aspect of the Trump presidency … have caused people to have sort of a fire sale on long-established conservative principles,” Goldberg said.
.. “Those conservatives who are dubious about President Trump’s approach have withered down to next to nothing,”
.. “It’s not CPAC’s change of attitude toward Trump, it’s the American conservative activists who have changed their attitude toward Trump. … By the way, we agree with them.”
.. Schlapp’s lobbying firm, brought in more than $1 million in revenue in 2017 — up from $640,000 in 2016 and $600,000 in 2015.
.. “He has professionalized the conservative movement to be the backbone of the Republican president in power,” Lanza said. “I think he would have been equally successful if it were President Jeb or President Cruz