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SIFMA Statement On The PRO Act

Date 22/07/2021

SIFMA submitted written testimony to the Senate Committee on Health, Education, Labor and Pensions regarding “The Protecting the Right to Organize Act” (H.R. 842, S. 420) in conjunction with a hearing held today. The legislation, known as the PRO Act, would change how independent contractor status is determined which could adversely impact hundreds of thousands of independent financial advisors (FAs).

“Independent contractor status has long been an integral part of the financial services industry. Independent broker-dealers and the nearly 150,000 individuals that affiliate with them as independent financial advisors serve millions of clients across the country,” SIFMA wrote in the testimony. “Independent financial advisors provide clients – very often main street investors – in their communities with personalized and comprehensive financial advice.

“The current model provides financial services professionals with multiple avenues for advising and helping American families and businesses build secure financial futures and protect their assets. Some choose to engage in this work as employees, while many others prefer the freedom and independence that comes from operating their own business utilizing the independent contractor status,” the statement continued. “Many have substantial relationships with one or more insurance companies, broker dealers, or registered investment advisors, which allows them to offer expanded options to their customers. It would be enormously disruptive to negate these agreements through Federal legislation.

“Recent efforts to address worker classification in the gig economy would detrimentally impact industries that have traditionally and successfully relied upon independent contractors, like our own. These efforts have focused on the overly broad and restrictive ABC test, which assumes workers are employees unless all elements of the test are met,” the statement concluded. “This test, along with other provisions in the legislation, will subject the financial services industry to significant uncertainty regarding the measures that govern the use of independent financial advisors and this, in turn, could adversely affect those individuals who have long enjoyed the benefits of independent contractor status. Given the rigidity of the test and uncertainty surrounding it, we believe the ABC test could result in the reclassification of independent financial advisors as employees of broker-dealers.”

SIFMA is urging the Senate Committee on Health, Education, Labor and Pensions to consider an alternative test or an exemption. The full written testimony can be found here.

SIFMA this week also joined a coalition of trade associations, whose combined members provide financial services to more than 112 million American families, in a letter to the Committee echoing these concerns, which can be found here.