SEC Reverses Course on JOBS Act Rulemaking

In a victory for investors and the integrity of the rulemaking process, Securities and Exchange Commission (SEC) Chairman Mary Schapiro has decided to follow standard rulemaking procedures in adopting its first major rule implementing the controversial, anti-investor JOBS Act.  The Commission had planned to implement the law’s provision lifting the ban general solicitation and advertising in private offerings through an interim or temporary rule, delaying any opportunity for public comment on the proposed regulatory approach until after the ban had been lifted.  CFA joined with current and former regulators, leading securities law scholars, and advocates for investors, workers and older Americans in writing to Chairman Schapiro last week to protest that circumvention of the Administrative Procedures Act.

In their letter, advocates call on Chairman Schapiro to “abandon this rushed approach, which puts vulnerable investors at risk, and to adopt instead a fully transparent rulemaking process based on careful consideration of the significant potential harm to investors” and “the best ways to eliminate or minimize those risks.”  On Friday, Chairman Schapiro confirmed that the Commission would do just that, issuing a proposed rule at its meeting this week and waiting to finalize the rule until after public comment.

CFA Director of Investor Protection Barbara Roper issued a statement praising the decision.  “We applaud Chairman Schapiro and the SEC Commissioners for their willingness to listen and respond to investors’ concerns,” she said. “Ultimately, the final rules adopted will be the test of the Commission’s commitment to protecting investors and market integrity as it implements the JOBS Act. But slowing down the process and allowing an opportunity for careful analysis and public comment is the first essential step toward producing a strong, pro-investor rule. We look forward to working with the Commission to ensure that the potential harm to investor is carefully considered as rules lifting the ban are crafted and that strong investor protections are incorporated into the final rule lifting the ban.”

Roper noted that, while the JOBS Act requires the Commission to lift the solicitation ban, decisions about how to do so raise complex issues that the Commission couldn’t possible have addressed in the rushed timeframe directed by Congress.  Despite that fact, Chairman Schapiro was already drawing fire for her decision from House Republicans last week, including members who have previously criticized the agency for not performing adequate economic analysis before rulemaking.

“Cost-benefit analysis has become the defining issue for the agency,” Roper said.  “If anti-regulatory forces are able to pressure the agency into using cost-benefit analysis to stall and weaken regulations to strengthen investor and market protections, like those required under the Dodd-Frank financial reform act, but ignore it when weakening investor protections, the SEC will cease to function as an investor protection agency.  That’s why this decision is so important – not just because it offers an opportunity to ensure that this particular rule incorporates appropriate investor protections, but also because it sends the message that whatever approach the Commission adopts on economic analysis will be applied equitably.  Now it will be up to the Commission to follow through on that promise and carefully weigh the investor protection impact of this and other JOBS Act requirements and fashion the rules accordingly.”

Product Safety Act has Brought Safer Products, Better Information

Last week was the fourth anniversary of the passage of the Consumer Product Safety Improvement Act (CPSIA), and advocates marked the occasion by highlighting the progress that has been achieved since the act’s passage. The law includes strong product safety reforms that overhauled the Consumer Product Safety Commission (CPSC).  It makes consumer products safer by requiring that CPSC issue safety standards for infant and durable products, significantly decreases lead levels in children’s products, and creates the first comprehensive publicly accessible consumer complaint database. The CPSIA also gives the CPSC the resources it needs to protect the public, requires that children’s products are tested before they are sold, requires product registration be offered to consumers for certain infant and durable products, makes toy standards mandatory, bans certain phthalates in children’s products, and increases civil penalties that CPSC can assess against violators of CPSC laws.  “The CPSIA has given new life to the U.S. Consumer Product Safety Commission. The agency now reflects consumer perception of what our nation’s product safety net should be. Consumers are safer as a result of the CPSIA and its effective implementation,” stated CFA Senior Counsel Rachel Weintraub in a news release on the fourth anniversary. “Never in CPSC’s history have more rules been promulgated and in such a short time period.  These rules will have an important and positive impact on consumers.”

CFA and NACPI Release Top 10 Consumer Complaints

Cars, credit and home repair and construction once again topped the list of complaints made to state and local consumer protection agencies, according to a survey released last month by CFA and the North American Consumer Protection Investigators (NACPI). The fastest-growing complaint areas, according to the report, were fraud, debt collection abuses, Do Not Call violations, mortgage-related problems, and home improvement. Budget cuts and limited resources were most frequently cited as the biggest challenges that state and local consumer protection agencies faced last year, along with the evolving nature of fraud and the fact that many scammers are located in other countries, which complicates efforts to resolve complaints. “State and local agencies are essential components of the consumer protection system in the United States,” said CFA Director of Consumer Protection Susan Grant. “Their services save consumers and businesses money, relieve the burden on courts, foster confidence in government, keep the public safe, and help ensure fairness in the marketplace.”

Families Struggle Financially, But Planning Helps

The recent recession has left many American families struggling to make ends meet and to save for the future, according to a survey report released last month by CFA and Certified Financial Planner Board of Standards, Inc. (CFP Board), but those who have prepared a personal financial plan feel more confident and report more success managing money, savings and investments than those who have not, the survey found.

Nearly two-fifths (38%) of the 1,508 household financial decision-makers surveyed said they live paycheck to paycheck, while less than one-third (30%) indicated they felt comfortable financially and only about one-third (34%) think they can afford to retire by age 65.  The survey, which utilized a number of questions asked by a 1997 CFA-NationsBank survey, clearly demonstrates the impact of the Great Recession on households’ financial well-being, with far more respondents today indicating they live paycheck to paycheck and are behind in saving for retirement, for example.

Yet, as with that earlier survey, those with a financial plan report faring better than those without one according to several measures of financial well-being.  Planners are significantly more likely to feel they are on pace to meet all of their financial goals, such as saving for retirement or for emergencies, to feel “very confident” about managing money, savings and investments, and to describe themselves as living comfortably.  For those in the two highest income brackets, planners report saving a higher percentage of income and having built greater wealth than non-planners.  For those in the two lowest income brackets, planners with credit cards report being much more likely to pay credit card bills in full.

Unfortunately, only 31 percent of respondents said they had a comprehensive financial plan.  However, about two-thirds (65%) indicated they follow a plan for at least one of their savings goals.  “Our survey clearly shows that having a personal financial plan helps both rich and poor achieve their financial goals,” said CFA Executive Director Stephen Brobeck. “Having a financial plan increases one’s confidence and effectiveness in managing, borrowing and saving money.”

CFA and Kroger Collaborate to Fight Fraud

Collaboration between CFA and supermarket giant Kroger is helping to prevent consumers from falling prey to fraud. Kroger and many other large stores offer money transfer services, such as Western Union, for the convenience of their customers.  Unfortunately, crooks exploit these services to get quick cash from their victims and to launder money.  To combat these abuses and protect its customers, Kroger trains its store associates to spot danger signs of fraud. So last year when Kroger asked for permission to incorporate CFA’s fraud videos into a new training DVD for its store associates, CFA readily agreed.

“The people who work at the money transfer service counters are often the last line of defense against fraud,” said Susan Grant, CFA’s Director of Consumer Protection.  “If they know how these scams work, they can warn consumers that they might be one step away from becoming victims.” According to Kroger, its new training video is paying off. Earlier this year, the Ohio Attorney General awarded a Kroger associate with a Certificate of Service for stopping an elderly woman from sending money in a “grandparent scam.” CFA’s fraud videos and other materials about common scams are at www.consumerfed.org/fraud.