Wall Street Pays to Play


Financial industry lobbyists know that money is the key that opens doors on Capitol Hill. Trade groups representing the insurance, securities brokerage and financial advisor industries are lobbying and donating huge amounts of money in an effort to buy hearings and sway votes on legislation and rulemaking they deem important to their interests, according to an InvestmentNews article by Mark Schoff Jr. entitled “Industry trade groups flex lobbying muscles.”

According to the article, the amount of money and time spent by these groups has increased significantly this year. The names may be unfamiliar to individual investors, but the lineup includes:

  • The Securities Industry and Financial Markets Association, which represents hundreds of securities firms, banks and asset managers, has spent $2.7 million on lobbying so far this year and donated $555,000 to political campaigns last year.
  • The Insured Retirement Institute, an insurance trade group that has secured 175 meetings with Congressmen (up from 100 last year) and established a political action committee to contribute to electoral campaigns. The IRI has spent $172,423 on lobbying so far this year, and made donations and hosted fundraisers for various politicians.
  • The Investment Advisor Association spent $160,000 on lobbying and donated $38,000 to political campaigns in the 2010 election cycle.
  • The Financial Services Institute Inc., which represents independent broker-dealers and affiliated financial advisory firms, conducted a week-long “advocacy summit” on Capitol Hill, spent $182,000 on lobbying so far this year, donated $72,000 to political campaigns, and sent 150 members to 260 congressional offices to advocate for a “self-regulatory” organization (“SRO”) for financial advisors.
  • The National Association of Insurance and Financial Advisers conducted its “Capitol Hill day” in which 1,000 of its members had meetings with Congressmen and their staffs about the SRO, tax issues and an expanded fiduciary duty rule for retirement plan advisers. NAIFA has spent $630,000 on lobbying and donated $1.4 million to political campaigns in 2010.

One of the primary goals of this extraordinary outlay of money has been to minimize or eliminate regulation that was adopted following the 2008 financial meltdown in order to prevent a reoccurrence of such a crisis. A second goal has been to facilitate Wall Street’s ability to do business in a “free fraud atmosphere” by rejecting fiduciary standards and minimizing the obligations of those entrusted with handling investors’ funds. In short, at least some of these financial institutions want a market where “greed is good” and “anything goes.”

A third goal of these trade groups is to capitalize on the 76 million baby boomers who they believe are or will soon be looking for income-generating investment products. Such products include both immediate and deferred annuities as well as a variety of alternative investments, such as structured products and reverse convertibles. Many of these are complex financial weapons of mass destruction with risks that are often not well understood by investors or the agents who sell them.

While regulators have expressed concerns that selling firms have not educated their agents or investors about the important risks of the investment products they sell, it is perfectly clear that industry trade organizations have devoted substantial resources to “educating” politicians about their members’ interests.

Page Perry is an Atlanta-based law firm with over 150 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. For further information, please contact us.