This week, Congresswoman Maxine Waters (D-CA), the Ranking Member on the House Financial Services Committee, sent a letter to Department of Labor Acting Secretary Keith Sonderling, urging him to withdraw its proposed rule, Fiduciary Duties in Selecting Designated Investment Alternatives, warning that it would expose the retirement savings of millions of American workers to risky investments while benefiting Wall Street firms.

In the letter, Ranking Member Waters raises several concerns, including that the proposal would encourage fiduciaries overseeing 401(k) and other retirement plans to steer workers into private equity, private credit, digital assets, real estate, commodities, and other alternative investments that often carry higher fees, limited transparency, and significant liquidity risks. She further warns that the rule would make it easier for retirement plans to offer investments that even large institutional investors are increasingly trying to sell or exit.

“Funneling a vast pool of retirement capital into private markets would only deepen the incentive for companies to remain private longer. Private capital is attractive to issuers precisely because it comes without the disclosure, governance, and accountability obligations of a public listing,” wrote Ranking Member Waters. “If the Department effectively guarantees private funds a new and durable stream of 401(k) contributions, it reduces—at the margin and in the aggregate—the reason any company would submit to the rigors of a public offering. The predictable consequences are fewer initial public offerings, less price discovery, diminished opportunity for ordinary investors to share in the growth of successful companies through transparent registered markets, and a still more deeply bifurcated capital market: one in which sophisticated investors own the companies of the future on favorable terms, while ordinary workers’ retirement savings are routed into those same companies on inferior terms and at valuations the managers set for themselves.”

Waters additionally warns that the proposal would open the door to increased exposure to digital assets before federal regulators have completed the investor protection framework necessary to safeguard consumers. She also raises serious concerns about conflicts of interest surrounding the development of the rule, noting that a senior Department official involved in advancing the proposal previously led a fiduciary liability insurance company that could benefit from its adoption.

Ranking Member Waters added:

“In the name of ‘expanding access,’ the proposal would expose the retirement savings of ordinary Americans to assets that sophisticated institutions are now working to shed; it would accelerate the decline of the public capital markets that have long been an important engine of American wealth-building; and it fails to address significant conflicts of interest by those in the Administration advocating for its adoption, including an Assistant Secretary at the Department with a direct financial interest in the rule’s adoption.”

Waters concluded that the Department should immediately withdraw the proposal, arguing that it would undermine retirement security, weaken public markets, expose workers to unnecessary risks, and advance a regulatory agenda shaped by troubling conflicts of interest rather than the best interests of American savers and investors.

See the letter HERE.

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