Blowback To Obama’s Rules Governing Brokers

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BrokerDealer.com blog update profiles the latest obstacles to President Obama’s vision of imposing a fiduciary obligation on the part of securities industry brokers is courtesy of coverage from Bloomberg LP.  In what might be called “Blowback Mountain”, The Obama administration plan to tighten rules on brokers is facing plenty of blowback not just from Republicans, but  from the president’s own party.

Key Senate Democrats met this week with Labor Secretary Tom Perez to argue that his plan — which would force brokers handling retirement accounts to put their clients’ interests ahead of their own — could backfire and make it harder for consumers to get investment advice.

“There are some real problems here,” Senator Jon Tester of Montana, who attended the meeting, said in an interview. “If I was a broker-dealer, I would not touch anything that didn’t have a lot of money associated with it.”

Pressure from Tester and four fellow Democrats could undermine support for the proposal, which has already been attacked by Republican lawmakers and Wall Street groups. The Labor Department, which says biased advice and hidden fees cost investors as much as $17 billion a year, issued the proposal on April 14 for a 75-day public comment period.

Under the plan, brokers would have a fiduciary duty to put clients’ interests first, a shift that could reshape how they steer clients toward products and collect fees. The current standard only requires that brokers recommend products that are suitable, meaning they fit a client’s needs and risk tolerance.

According to Tester, the Labor Department shouldn’t interfere with the ability of brokers to charge commissions, which can be a cheaper way for investors to pay for advice. Any new rules should be harmonized with the Securities and Exchange Commission, which oversees the brokerage industry, he said.

SEC Chair Mary Jo White said last month that she favors imposing a fiduciary standard on all types of retail-investment transactions. The SEC is far behind the Labor Department’s progress, however, and White warned the effort would be complex.

President Barack Obama, Senator Elizabeth Warren, Representative Maxine Waters and other Democrats have endorsed the plan. Many Republicans have said they oppose the rule and the House could advance legislation to block it.

Joining Tester at the meeting were Senators Ben Cardin of Maryland, Joe Manchin of West Virginia, Joe Donnelly of Indiana and Gary Peters of Michigan.

“Senator Cardin is among those who are skeptical,” Cardin spokeswoman Sue Walitsky said Friday. “His concern is making sure that average Americans still have access to retirement advice and education.”

Spokesmen for Manchin, Donnelly and Peters didn’t respond to requests for comment, nor did Labor Department spokeswoman Tania Mejia.

McGraw-Hill Education IPO Could Be Here Just In Time For Back To School

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The school year may be winding down but investors are already looking forward to the back to school season for a likely launch of textbook company, McGraw-Hill Education’s initial public offering. Brokerdealer.com blog update profiles one of the largest educational publishers in the world, McGraw-Hill Education, and the rumors surrounding around the likelihood that they will be launching an IPO just in time for the new school year. This brokerdealer.com blog update is courtesy of Fortune and their article, “McGraw-Hill Education said to be preparing for IPO“, with an excerpt below.  

McGraw-Hill Education is planning an initial public offering (IPO) as early as the fourth quarter of this year, potentially valuing the textbook company at around $5 billion, including debt, according to people familiar with the matter.

The company’s owner, private equity firm Apollo Global Management, has held talks with investment banks about the IPO, though their underwriter roles will not be finalized before the summer, four people said this week.

McGraw-Hill Education would aim to go public near the end of the year, following the back-to-school season when it generates the bulk of its revenue through textbook sales, the people added.

A spokesman for McGraw-Hill Education did not immediately respond to a request for a comment, while a spokesman for Apollo declined to comment.

New York-based company McGraw-Hill Education is one of the largest educational publishers in the world, selling textbooks for school and university students and professionals in about 60 languages. It competes withPearson Plcand Cengage Learning Inc, and, like its peers, has sought to make most of its offerings available on the Internet as more people read books on tablets and phones.

To continue reading about McGraw-Hill Education’s IPO, click here.