Washington, D.C., March 9, 2021 – SIFMA today released the following statement from Kenneth E. Bentsen, Jr., SIFMA president and CEO, expressing concerns with H.R. 842/S.420 known as the PRO Act and urging the need for an exemption for independent financial advisors. As proposed, the bill would change how independent contractor status is determined under the National Labor Relations Act (NLRA) by imposing an “ABC” test on all businesses and workers, which could adversely impact hundreds of thousands of independent financial advisors (FAs):

“Approximately 150,000 registered brokers and investment advisors operate their own financial advisory firms utilizing the independent contractor model. This allows these firms to obtain brokerage, research, compliance, clearing and custody services from larger broker-dealers while owning and controlling their business.  Further, the FAs own and manage the relationship with their clients and provide them investment education and guidance and other financial planning for life events. Independent financial advisors are entrepreneurs who explicitly choose to own and operate their own business.  They are far different from the type of worker the underlying bill seeks to address.

“The rigidity of the ‘ABC test’ in the proposed bill and legal uncertainty surrounding it could result in the reclassification of independent FAs as employees or require them to build out services that they more efficiently lease from other broker-dealers.

“The PRO Act would upend an industry that is not the target of legislation and unfairly disrupt the livelihoods of hundreds of thousands of advisors who have explicitly chosen to operate their own businesses. We encourage lawmakers to exempt independent financial advisors from this legislation. Narrower, more focused legislation would avoid the unintended consequence of capturing traditional business models.”

SIFMA also joined with 10 trade groups in submitting a letter to Congressional leadership echoing these concerns, writing in part:

“Additionally, affiliated financial advisers have a long history of appropriate classification as independent contractors and are not involved in the worker classification problems found in other industries. They are not employees for purposes of determining applicability of federal (ERISA and EEO1) reporting requirements and State wage and benefit provisions. Compensation practices in the securities industry are carefully recorded, with IRS Form 1099 reporting universally required. As a result, the problems of cash payments and unreported income that may exist in other industries do not exist in the securities and insurance professions. Furthermore, the insurance and independent broker dealers are  highly regulated.”

The full letter can be found here.

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SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org