September 29, 2015

Senator Warren Sends Letters to Brookings, Labor Dept

Questions Validity of Industry Funded, Editorially Compromised Report Critical of Dol's Conflict of Interest Rule

Letter to Brookings
Letter to Labor Department

Washington, DC - United States Senator Elizabeth Warren sent a letter to the Brookings Institution regarding her concerns about the authors' financial conflicts of interest and previously undisclosed financial industry editorial input into a study authored by a Brookings' Nonresident Senior Fellow Dr. Robert Litan. Dr. Litan's study was on the Department of Labor's proposed Conflict of Interest rule, which was written to ensure that retirement advisers give investment advice that is in the best interest of their customers. Dr. Litan testified before the Senate Health, Education, Labor and Pensions (HELP) Committee in July 2015 about his study, which was critical of the DOL rule.

In the letter, Senator Warren explains that, "Dr. Litan's study, which has been featured in the financial industry's comments and public opposition to the DOL regulation, contained a broad - but vague - disclosure, stating that ‘funding for this study was provided by the Capital Group, which provides investment services worldwide,'" and had previously been critical of the DOL's rule.

Following the hearing, Senator Warren sent Dr. Litan questions about the study and received responses, including that the Capital Group commissioned Economists, Inc. to have Dr. Litan and Dr. Hal Singer conduct the study, and that "Economists, Inc. was paid $85,000 for us to conduct" the 28 page study. Dr. Litan further clarified that "my personal share was $38,800."

Dr. Litan also provided two additional pieces of previously undisclosed information-- that the study was funded entirely by the Capital Group and that the Capital Group provided "feedback on our initial outline and some editorial comments" on the study.

Senator Warren also wrote a letter to DOL Secretary Thomas Perez for the rulemaking record outlining her concerns about the "financial conflicts of interest and other questions relating to editorial and substantive content" of Dr. Litan's study. DOL is now reviewing public comments on the proposed Conflict of Rule.

"Families and small investors deserve access to unbiased advice about their finances and financial decisions, and it is equally important that the Department of Labor also relies on unbiased input from experts and the public about the impact of the proposed Conflict of Interest rule," she wrote. "Based on the newly disclosed information, Dr. Litan's and Dr. Singer's highly compensated and editorially compromised work on behalf of an industry player seeking a specific conclusion does not appear to meet this standard."