tv Key Capitol Hill Hearings CSPAN May 29, 2015 7:00am-9:01am EDT
regarding the excessive compliance costs and anything passed on to investors, the industry has made a lot of technical objection about the role in how it's going to raise their compliance costs and is going to ultimately filter down to investors. but that is belied by the fact there are already fiduciaries who are serving small dollar small balance investors are they are doing it according to producer standard and doing so profitably. so there are robolab visors who use technology to provide high-cost low performance -- sorry high-performing, low-cost investment advice. [laughter] but in addition to rowboat advisors give new entrants or adapting technology to give high quality services. vanguard two weeks ago just provided personal advisor
service, i'm sorry, fidelity, but $50,000 which is i believe relatively small balance all in concert twice and product under 50 basis points. >> can i jump in wax i think the best interest contract is simple. it's just a thing make promise to clients you're putting their best interest first, develop policies to make sure your monitor your employees and be accountable if you did not do that. this 400 pages of proposed regulation are proposed regulation. the department did not comport think this is the point and this is what we are doing. they invited extensive on every piece of the regulation and the exemption in the best interest contract. it was remarkable to me when
working on this to see a much they don't have in common. everyone is trying to get people to save more for retirement. the decisions are complicated. it's on us to manage our retirement savings. the goal here is for people to come forward from all sides all perspectives until the department how do you make this more workable? how do we streamline this? many people came in to tell me they use disclosure, they have recommendations on disclosure. i was to come forward and tell the department how you would design a disclosure that you think is effective and works that people understand their product but disclosure alone cannot be a solution. you have to per disclosure with accountability. >> me interject for one second and point out we used a few terms that some of the tv viewers may not know. you refer to 50 basis points. just clarify that. you also mention robo advice.
that is a term that was made when i started researching this. could you explain what we are talking about? >> technology that provides computerized models that provide high quality low cost investment advice. so they're a couple like personal capital betterment that you can go online. you plug in the amount of money you want to invest your goals your risk tolerance, your time horizon. they invest the money for you. but in addition to robo advisors that are actual people you can go to. cfc professionals provide financial planning services subject to fiduciary duty for example, sheryl garrett provide high quality low cost fiduciary advice and it is so profitable,
profitably spent a couple points i'd like to make the number one you mention vanguard which is a fine company. the one observation i would like to make is that you mention the 50,000-dollar account being in your mind i guess maybe an average type account or if you look at some research that was done in 2011 the average ira account was probably in the range of 10000. certainly less than $25,000. substantially less than $50,000. but i would also like to go back to the best interest contract extension that has been proposed, and that exemption requires as a sameera was saying that you agree to act in the best interest, that you have policies and procedures that would mitigate conflict of interest. and i would say that the contract itself has its own
problems. you are required to get the contract signed before you have a conversation with an individual. and, frankly, i don't know anyone who is thinking they're going to sign a contract with you before the first what you have to offer. >> the contract they are signing would not require them to go ahead and accept your services. >> they wouldn't have to use her services but they still have to sign a contract. i'm talking -- >> that's not what it requires. >> you are required to get the contract is signed. >> when you talk to somebody will become a client you don't have to sign anything. >> one thing we haven't had very much but it is the actual conflict of interest that people allege. i'm going to run through what i'm sure is an incomplete list. it is said that the very existence of commissions could be a conflict of interest because it is presumably
advisors wanting more transactions which will would generate more commission. it is said it is a problem if the broker will get better compensation if he sells you mutual fund from one company than if he sells you a mutual fund from another company. often of course a company that will pay the most compensation is the one that employs the broker. some foreign governments have simply said not a this is a loud. this proposed rule allows a lot of it under safeguard. i think safeguard led to the 400 column inches if i'm not mistaken. sounds to me like the industry scored a big victory in this. am i wrong speak with the question, i think at the end of the day i don't think the question is going to be the best interest standard. i don't think the industry concerned at the end of it will be about disclosure.
these are heavily regulated industries already. disclosure is a fact of life. it is a sensible way to provide that disclosure, on a cost-effective basis i think that will not be a problem. the question is whether this exemption is in fact workable or whether it's a poison pill whether it's something that just can't be accommodated in a reasonable way in the real world. i would not dream to speak for fidelity but if fidelity add 17 million 401(k) participant accounts, there's not a chance in the world they will get 17 million people designed those contracts. just will not happen. that's just one example. >> let me interject. what would happen -- i happen to be one of those 401(k) one of those irate clients with the building and i've been to throw a women i got. i do want to anyway indicate others do that.
what happens when it does admit away that is asking me to sign this contract? does anybody want to come speak with you as having that is going to be a requirement. what the industry is proposing is a proposal. we agreed with the first proposal was completely unworkable. i was a critic of that. it's not clear this isn't equally balanced champion because most people are critics of the original proposal but he is correct, asking anyone who has an exact same -- existing contract to execute the contract will not be workable for there are problems that are unworkable but that is why i like your approach would not take a scorched earth attack on a proposal. we have constructive engagement as most members of the industry provided and many other broker-dealers have not had a major problem with it to deal with these issues. there are a couple of problems for the industry and expect them to be fixed.
a couple problem from investor protection point of view. i think these things will be dealt with. the big exemption is really only three pages, 400 pages -- i'm adopting the term as the best interest conflict. >> i thought that was a company. >> the industry offer legitimate problems. i have a chart and if i am the law professor this is in a law professor budget -- >> notice the high-tech equality. >> just the day example. conflicted compensation. what this shows is what each of these fund complexes is paying in basis points to a particular broker deal for selling their funds. spinning once again a basis point is 100th of a percentage point. roughly one-eighth of a person
that. >> this conflict of interest, he might be more certified to sell this fund and get 13 basis points than this one at 2.4. the cynics amongst you might think these are the funds being so. edward jones is the broker dealer in fact the majority our american funds which is managed by capital research, one of america's great companies along with fidelity. and it shows that edward jones is managing the conflict of interest to large extent but if you look at the numbers you see fairly small percentages are being sold to these fund company shares. what the dealer wants to do is to have procedures in place to manage this obvious conflict of interest in virtually all broker-dealers already have relative dissolution of the looks like to disclose those complex, tell their customers what they're paying in dollars
and the are a couple of ways in which it's going to be a little too expensive i think to comply with. this is concretely all of us can be solved with a small account of $10,000 instead of selling them a fund that charges 3% load which pays $300 typical. you have to think hard about whether you should sell a 4% 5% or 6% load. that means the broker has an incentive to double his compensation by selling virtual identical fund for twice the amount of money involved. concretely that is what we are talking about. differential payments for selling the same thing, commissions and what this shows revenue-sharing payments. >> i would like to agree with the profession and a couple of respects the and one in law school i always agreed with my professor i want to say that you're right. this is a proposed rule. what the industry would like to
do is to work constructively with the administration and the dol to get this right. you are correct there's some unworkable provisions in this rule and we are very concerned that from the perspective of the participant, and i know what the educators are concerned in terms of cost and things that makes sense. but at the end of the day you of real people who are trying to make difficult decisions and who are trying to get it right. we want to continue to work with the administration. i believe there is a balanced approach to solve the problem. i agree with you wholeheartedly in terms of the broad principles that were presented by the administration prior to the proposal of the rules meaning best interest standard, meaning there should be reasonable compensation. the other thing is that there should be disclosure of material conflict. that's what this is all about.
but at the same time the administration did say that middle-class investors will continue to have twice and access to the products and services that make it today. and for us it's the things they need and they want on their own terms. i think there's a path forward and the industry wants to contain to work this out what's important is we want to actually see what the dol is thinking about. this is the second time we've had the proposal. we want to make sure we get it right for all stakeholders but primarily for those average investors, 80% of the customers that we service, average everyday working people and we need is to work within. and to our 70 million customers in the 401(k) plan it will be a challenge to get them to sign a contract, even if it is three pages or 300 pages.
because that's not what they're used to doing. the contract has been entered into with the plan of sponsor the most participants think that plan sponsor has identified vanguard fidelity, whoever if we're lucky enough to get the business, and to engage with them. so i assume that they are providers that do comfortable with the so to suggest before you can have a conversation around taking a hardship, because that happens everyday, you say you have to sign this contract. for most of those customers that will be frustrating to them. they will be confused and for them they just won't do anything. they won't do anything that will put them on a path. >> i also, it's really great to hear how much there is agreement on the panel and how much people think that they want to contribute to this comment process. it's overly to that from my old job and i was i think there's a lot of evidence that department
learned a lot over the five years and change the proposal substantially from what was originally put out there in 2010. they listened and there's evidence of the lessons. if you constructively engages a kid i think you will be pleasant surprise for comes up on the other side because they were transparent about what they're thinking right now what the questions are, what the various ways they could take the final rule. some examples of the things they did have a big changes and more responsive to what industry as for was they didn't ban commission, they didn't and revenue-sharing to they said figure it out. we want this to be business model neutral we want to preserve choice. choice. people one-to-one of transaction. they should give everyone a transaction. they want to put anything like that on so they pressured the flexibility. but also radically changed the way exemptions are usually
handled by the department and offered a standards based approach because the industry said the way the rules are currently written they are very narrow. anytime we want to can't of a change in our business practices we have to go in and negotiate a new exemption that's not workable. the department said let's see if we can modernize this make it more adaptable to the content workplace and allow businesses evolve over time and change their practices. that is of the essence of what this best interest contract is trying to do, sing develop the policy and procedures able to update and change a business models without having to re- negotiate and show the regular everything you want to do. >> excuse me, we are about to go to questions from the audience. i want to interject, there have been these that are not known -- 12 b-1 fees are charged to mutual funds which enables brokers to be compensated on a
continuing basis for the fact that investors of that mutual fund and still to claim the fund is a no load fund because there is a product sales charge. they have been controversial in the past and widely accepted. that's what a 12 b-1 fees. you wanted cash but i will let you respond. >> is when aspect we need to discuss and that is when you talk about the best interest contract extension it does alter the choice of investment products and services because the dol has proposed a limited list of investment in which you might recommend to a customer. none of those investments would include futures commodities which may in fact, be appropriate for particular customers. i think it really is the best interest standard, then the person was a financial professional should be allowed to exercise professional judgment based on all the facts and circumstances of that which particular investment products
and services are ones that best meet the needs of a particular customer that is front of them at that moment. >> let me ask this is a question that is come from someone in washington, d.c. named john. what current practices would be prohibited under the proposed fiduciary role? and what kind of financial services professionals support it or is there universal opposition? >> versus herbal things but one thing i want to point out in particular, because this goes to i think retirement policy and that's around it with the coverage issue. as you think about small plants, those with participants with less than 100 participants, under the current structure of the rule about the dol had this intention, but the way the rule is structured is that financial advisors would not be able to help small businesses with the
formation of plans, and for those who currently have plans with maintaining those plans. for a lot of small businesses it's difficult for them to determine what the appropriate contribution levels they should require into a plan in terms of default. they have concerns about the appropriate investment options. there are a lot of mutual funds and other products for which -- >> you are saying for several fund it would not be able to -- >> but small plan should not be able to engage in conversation to how to make these decisions. >> what other practices, there are current practices would be prohibited under this rule? >> contract extension, firms would have to policy and procedures that are recently designed to mitigate the harmful effects of conflict of interest. they could structure their compensation regime to reward the selling of certain products.
they couldn't face bonuses or sales quota on the sales of certain products. they can still charge differential compensation which means a higher amount for selling one product over another but it would have to be based on neutral and objective factors, not based on compensation. if i can go back to the list of permissible assets being too narrow. it is quite extensive, and it includes registered investment companies. so i'll mutual funds, open and come close in fund etf exchange listed stocks corporate bonds. what it doesn't treasuries come all the annuities. so what it doesn't include is a high risk like a derivatives, like future that you'd like to include it doesn't include private equity. hedge funds. these are riskier assets that are usually allowed -- >> that only rich people are allowed to buy. >> that's right that's right.
they are less liquid, more risky, less transparent. we are not saying an investor or a retiree investor cannot have those assets but if you want to have those they can ask the broker to execute an order because as long as there's a recommendation it's fine. the advisor can recommend the album outside of a retirement account, or the advisor can recommend that investment, but not pursuant to a conflicted compensation. >> it's not a question -- there's risk in any investment. just to say that something is publicly traded security doesn't mean that there is more risk or less risk but it depends on the issuer depends on the market conditions, depends on a lot of things. excuse me, excuse me. my contention is that it ought to be left to the judgment of the professionals even with the customer in terms of what is the
customers need once in the customers best interest. some customers will need the protection that options contracts will provide to hedge fund exposure because they're trying to limit the risk and they accept they are moving into riskier instruments. because that's in their best interest to i'm saying it's not necessary to say that i don't have to have on the same one size fits all said. >> i would also add that if an advisor is not, does not receive conflicted compensation they can make those recommendations and they can offer those products and advise their clients their products. if there are some ways you think those types of products can be common infrastructure then go ahead and propose it as well. >> back to the question you had. samara, i hate to disagree with you on one point but with respect to current compensation practices and diverse forms of compensation that is allowable
in the market today under the b.i.c. exemption is correct all those forms of compensation would be about the outside of that exemption the proposal to allow a great many of those forms of payment. >> you know that's not true. the issue only arises if you have conflicted compensation in the first place. and as you know, felicia most commodities transactions that don't involve non-sea level compensation to give the industry has examples of compensation models where those products are being sold under a conflicted model advice, then i would agree, the dol should not be making judgments about types of investment. but technically nothing is prohibited. it's only prohibited if you insist your free -- your fee structure pays $10 for selling eight and 20 bucks for paying the. otherwise there is the issue.
we need to keep it on the table as well as the fact that structure deeply embedded in the industry. it would not be reasonable simply ask the first proposals that come let's just a race that. as far as prohibitions, what i would say is the practical effect of the rule is going to be that in arbitration were fiduciary duty violations are the most common claim what the role of it is prevent a defendant from arguing that they are not at the future. i know this is a little detailed, but what happens at arbitration which is for all cases are litigated, and arbitrators are not subject to a specific source of water they apply the law as they see fit. you have to show some of his relationship with trust and confidence that they were fiduciary that it's easier to win your case as to what duties within required. what this rule will do is in that litigation it will be a given they were a douche or
because of the contract provision and you still have to prove though what are the duties that were owed that were violated? which are more difficult but that will be the only thing you have to show. if i were to do a dollar and centssince analysis that would be the greatest impact. >> i want to get a few more questions and. do you predict that most firms will use the best interest contract extension to be able to continue to receive their current code conflicted compensation methods? >> i would hope that once we are through this entire process that we will come up with an approach where that sort of obligation is workable. adam sure if it's going to be the exact best interest contract, if you will, but there needs to be away that customers are protected and perhaps there is a legally enforceable
representation. that's just an option, something that might be workable that is enforceable and at the end of the day we will hold a service provider, their financial advisor accountable. not sure how that will end but a continuing conversation with the department and the administration i think it's an approach that should go forward. >> i agree on this. all we are looking for as secretary perez has said is a legally binding contract that holds advisors and the firms accountable. and there may be some issues at the time about when the contract is in place but it's a very technical issues that can clearly be -- >> i just received another question that is relevant. would it be possible to have the department of labor provide rather than forcing providers to seek 80 million plus contracts of individuals?
in other words, you would have to get dol permission for your b.i.c. proposal. and if you got it then it would cover your client. if you didn't get it well you have an argument with the department of labor. >> the final rule is not going to require you go to every one of your customers and get to decide off on a new contract. i think that's a given. and i'm not sure -- the investor advocates will say that is too much of a burden i don't think it's going to happen. but as to the other question i think was that it sounded like is a part into the exemption process. so for building would have to get one vanguard would have to get one. that's clearly not workable for this has to be what's known as a class-based exemption that and want to rely on. what's going to happen is what you probably have the most a negative consent letter. they will send out amendments to every contract that basically said this is what we're subject
to. we don't like it but here's what we are now subject to. they be dol would allow you to have the idea of a broker-dealer being a douche or. but as for entities or new customers go they all signed a contract anyway. this will be added to the contract in the fine print at the bottom right next to that mandatory arbitration provision that they might not like. >> for those who don't believe this problem is systematic, the problem we're referring to under the current rules, once the potential harm of more regulation likes i think this person's argument is there are lots of rules that prohibit things that most people don't do anyway, but there's no harm in them. most of us don't murder people but we have no objection to laws preventing it. does anyone want to answer that?
>> there's no harm to as you said adding additional roles that say that you shall not do what you shall not have already been told not to do. but i think there is more to it than that. you also have to build additional systems occurred are not required to date to conform to those requirements. and, in fact, the reality is that people are already violating certain rules if they're doing something conduct that is being described. we already have the rules come into the sec would be to step up and, of course, there will. there's a finra row, finra needs to step up the efforts of state insurance come state banking they also have a role to play but if it's criminal the justice department or u.s. attorney's office are adequately equipped to comment and take care of it whether it's sanctions penalties, jail time. if your violating the rules that are penalties and consequences to be born.
>> the other thing to not lose sight of is we're talking about retirement savings, not just talk about any sort of banking and insurance, investment products. congress has always placed a higher standard on retirement savings when they passed erisa. this was been a higher duty owed to people or saving for retirement in part because there are so many tax incentives that drive people into the marketplace. we've always had a world in which the financial service industries has had to work under so many overlapping regulators depending on the marketplace they have entered into. >> as far as protections, it's important and i think most folks in the industry would agree. what is concerning is that when you come out with regulations that may be overly burdensome or extremely costly, or those
that would cause some confusion among the customers. so you're right in terms of retirement savings, it's important to. however, most customers when you're engaging with them whether it's a retirement account or not, they don't understand why your engagement would perhaps be different if it's retirement or non-retirement. all they understand is we are coming to you for help and they're looking for uniformity which is important in terms of the regulatory approach. i would say once again as we work through this rule with the department of labor and the administration that we come to a place that makes sense, that's workable primarily for investors and the service providers who are trying to give them the products and services they currently receive today on their own terms. >> is the delinquent of a different contract for retirement ira accounts and non-ira accounts speak with are not sure what the delete will
have the hopefully we will work with the department of labor to come up with something that makes sense. >> that raises another question. the sec was supposed to do with some of this under dodd-frank the it hasn't. clearly when i go to an investment adviser seeking investment advisor, i expect that same standard i think for the money is in my ira is for the money out of my ira, in terms of trying to go with my best interests. shouldn't we just have a rule like now for all investors? >> the question as you said is very complex because you've got the interplay of the broker-dealer, part of the regulatory structure versus investment advisory board. and when the sec did a study back in 2011 that was mandated under the dodd-frank act, which the staff recommended the commission treat broker-dealers
the same way you treat investment advisors, as relates to align the standards. that was the recommendation in the report. then ranking member barney frank sent a letter to then chairman shapiro in which he told her that if congress wanted to move the broker-dealer exemption out of the 1940 act which he governs advisor to would've admitted the statute it didn't ask the commission to do the trick and asked him to come up with a different but not less rigorous standard the effort at the commission ground to a halt as people but they got exactly how does one accomplish that result. i think the point you are making however is that for protection of investors, that's what federal securities law exists for. doesn't matter if it's for retirement, college savings for your own enjoyment. you still have the investor protection part of the federal
securities law. i don't see any difference between the two. they key is whether you have additional things that apply only to erisa and the erisa statute which is the sole interest standard. >> and erisa exist because congress made the direct -- correct policy decision that we should care more about protecting retirement assets. there is a completely different standard which is one reason why the sec should not be doing this and deal should i derive no more pleasure out of watching members of congress trash the sec for being incapable of getting any rules and on until we're talking about the dol role in all of them what the sec to exclusive jurisdiction. i happen to agree with aside this is right that the sec is incapable of getting rolls done. if you look at the principal trading exemption, the sec has had a template rule in place now going on eight years that it is
incapable of adopting. also dol covers nonsecurity as you pointed securities revelation supplies, use securities but there's a lot of people whose iras are being put into non-securities what are often the most abused investment in retirement plans. >> be specific. what abuses are you referring to? >> some are put into gold or into collectibles to you'll you will find a higher percentage of abuses, everyone would agree when someone's ira has been put into those assets. if you buy those are not subject to sec jurisdiction of. >> regulated as insurance. >> if the sec was able to move forward, if they did move forward, the department of labor is ready to coordinate with them as much as possible. the two departments have a long history since they share jurisdiction over similar
spaces, even though the different underlying statutes and rules and responsibility that are used to working together. the sec give a lot of consultation to the dol stepped on the proposal. secretary perez had many conversations as well on this. the department stands ready and willing to work with the sec when and if the sec does proceed. >> but at the same time the dol should not be forced to wait for the sec because he had been waiting for about what 15 years? nothing to show for it. >> the report in the mid '90s which identifies the exact same conflicting scenario and the sec has been promising for decades to do something about it but really has done nothing. >> if you are a regulated company it will drive you nuts. >> i represent a broker-dealers and it drove me nuts. >> and drives you nuts to think we would deal on this issue on a piecemeal basis and we might have to spend do what we have to do to come into compliance -- >> i worked with dol unroll
makings and you know as well as i do there is an intensive amount of coordination between the two. and that a lot of sec people brought expertise and vice versa. notwithstanding critics was going on and still going on today. you can see in the proposal that was a very effective coordination and to some commodity issues as discussed in the proposal. >> we've been somewhat loaded question which i read and then try to modify it a little bit. isn't this just another example of where the administration has overstepped its bounds and we just have to wait for the courts to overturn it cracks my modification of that is is this regulation, when it comes out likely to be the subject of litigation from the industry? what part of the industry is likely to litigate? and/or the courts, notably the d.c. circuit court of appeals, likely to tell the department of
labor to back off? >> i would say the industry is already lining up for a lawsuit and has made a number of allegations about inadequate cost-benefit analysis. this is a standard fare for the industry side have to ask whether they plan on suing. >> they will certainly suit. on this one i don't think they will win. the d.c. circuit has an even split between republicans and democrats so the voting there is different from what it used to be. >> i just want to say before i know we are short on time that this is a proposed rule, as i said before. and currently the way it is structured it's unworkable. it doesn't work for participants so that they can get the advice and guidance they need. if the dol would continue to work constructively with
industry and come up with a rule that ties back into the principles as sameera articulated before the things that they said would be necessary to put forth their best interest standard. i think that we could get to a place that would make sense. so the dol before this is finalized, i think they need to fulfill those requirements of a principled-based exemption. that's what we were told would happen before the rule would come out with the 450 plus pages. that's hard for me to see that as principled-based. it seems more like specific and rule-based. so i would encourage the dol to continue to engage constructively with the stakeholders to let us see exactly what you're thinking in terms of the proposed fixes so that we can all sort of engage
in a conversation and come up with a rule that make sense for the investors. protect them that's important. requires the best interest standard but allow the products and services to continue and they can get what they need on their terms. >> i agree with pam but at this point it's not enough for industry and maybe the build is is different. i know of pam and i have had constructive conversations come and help as they continue but it's not enough for the industry to set its unworkable. they need to come to the table in good faith and work constructively to ensure a final rule that actually does work with those principles in mind. >> i in hearing the best happen. it's encouraged your people are coming forward filing comes with the department of labor talking to them and offering suggestions on ways to improve it. >> i would say it shouldn't just
be industry or other stakeholders who are involved as well and i think all of them ought to be around the table. and the major regulators on state and federal level as well to make sure there is a coordinated approach that works across the spectrum. >> on that somewhat optimistic doubt i'm going to into this. thank you all for coming. would be a great or disagree, let's thank them. [applause] >> wonderful segue here so i'd like to introduce as our final speaker ken bentsen president and ceo of the securities industry and financial markets association. ken, the floor is yours. book and this discussion. spent well thank your first of all let me thank bpc for hosting this important event on what is a very complex but also an extremely consequential matter. also appreciate the views of the
panel. before personally found it very interesting pick up a few tidbits about what might organization is going to do that i didn't even know about and that's always good to learn. [laughter] so i took notes on back. but let me make a few remarks and i had some prepared canard -- prepared remarks. that's what you think there is some common ground you what they think we can all agree on is that americans aren't saving enough for retirement. more needs to be done to encourage smarter and better cities. would take a snapshot of the current market $24.7 million -- trillion dollars. ownership has become widespread to 63% of households reported they had employer-sponsored retirement plans, iras or both in mid-2014 to iras made a 10.9% of household financial
assets at the unit into 214. households at 9.5% of the financial assets in 401(k)s or other similar retirement plans up from 7% in 1994. in 2013 about eight out of 10 new retiree households had employment sponsored retirement plans sponsored by private sector and government employees or iras. why we're moving in the right direction i think we would all agree we have a ways to go to continue to bolster our retirement marketplace. it is imperative we continued to afford retirement savings easier and more accessible and avoid the steps to make it more difficult. a discussion today in our opinion is not about who is for or against the best best interest standard weekly the question has been asked and answered. my members include brokerages, banks and asset managers all across the united states of all different sizes serving all types of clients who provide
multiple services including commission based broker service under this could exchange act of 1934 and fee-based investment advisory and investment advisers act of 1940 long ago endorsed standard of care for all retail investors not just the retirement sector. in fact we endorsed to before congress enacted section 913 of dodd-frank. we made our position action clear in comment letters to the sec in 2010 2011 20 welcome 2013 as well as to the department of labor back in 2011 i guess when that women. further, while the acc has not yet acted under the authority explicitly granted to them by congress it is worth noting the roles governing broker-dealers conduct with respect to retail investors both in retirement and not retirement accounts have mike whiddet towards the best interest standard i think mercer noted that is comes to -- in his
comments. most usually for guidance whether to 401(k)s and summer plan rollovers under regulatory notice 1345 to require brokers to put clients best interests ahead of their own. further investor claims also noted arbitration routinely include a fiduciary duty component. i don't say this to argue we should stop here. but rather to point out where we are today which often gets overlooked by policymakers but is already accepted by firms enter compliance officials. the debate is not if but how we should intimate such a standard. in our view such a standard should be consistent across the entire retail market and that was addressed in one of the questions that floyd that i think from the field. it should be consistent in our kitchen be consistent with the
intent of congress defined in section 913. our concern for the department of labor proposal is not with its definition of best interest. we support that address larger where we are today. rather, it is the further condition of and restrictions on investors that the department seeks to impose on top of and beyond the standard weekly extremist burdensome and perhaps ultimate into practice and consistent with the best interest of the client. the dol's proposed definition of who's a fiduciary is very broad. many more activities as was ever intended or that the department coverage of the proposed in 2010. for example the south exception for the previous version of brokers to market the products to retail customers this time around business owners exemption to market one service or product to retail customer or even just don't do it plan of a small business owner. bloggers and education exception to being a fiduciary is more
narrowly crafted in the current education both that's been in place since 1996. under the current proposal one can no longer have any specific investments without activities. but departments mechanism which wasn't discuss which of the rule could be business model neutral and allow for commission based accounts, best actress contract extension b.i.c., contains some the conditions and restrictions that our members believe it unworkable as drafted. with all due respect to director jeffrey zients why believe is quite sincere in his efforts on this proposal, i don't believe that, as a drafted the exemption is complex and confusing but it is certainly not streamlined. this is the material as the vast majority of iras and for that matter all retail accounts are held in commission brokerage account the investor routinely choose between commission based
brokerage nt-based managed accounts. almost all of our members offer both. investors have overwhelmingly chose brokerage account including for iras. the best interest contract extension with subject firms advised to new legal liability that was discussed to some extent on top of the existing legal liability are explicitly limited investor choice of product in our view impose level these at the firm level and seeks to set market prices and require firms to develop and build unprecedented new disclosure and compliance regimes, some of which may well conflict with existing security laws. because of the increased liability risk and compliance cost for them to vindicate the safer course of action may be to migrate most commission based accounts to be based accounts that in most cases are exempt. however, as the state of the fee-based accounts cost the invested more than commission brokerage account and that is because the higher service cost us less would be based accounts
but in most firms limit such accounts to high balance accounts potentially millions with no options for advice or guidance. one of our fine members has recently put together a small balanced account but is a $50,000 balance and is one of the panelists noted, most iras are below $25,000 imbalance. i think perhaps in addition the sec has questioned whether high cost based accounts are always in the client's best interest particularly buy and hold investors which potentially creates a conundrum. perhaps most importantly clients have larger already made the choice of the type of account they wish to purpose -- purchase. ironically in the dol's predatory impact analysis accompanying the rule and the previous council of economic advisers study in support of the rule which was mentioned a couple of times today, a study
which we believe is seriously flawed including the $17 billion figure which we did not believe is supported by the research cited in the study, but in that study the department cites the recent expense in the united kingdom through its retail situation review. floyd mentioned i think raise the question was raised with respect to this. if you read the research with respect to the uk's proposal and this is a research mission by the financial conduct of authority of the united kingdom as part of their post regulatory review what it found was more than 300 investors lost services from brokers because they said in an accounts. 60,000 new clients were turned down last year and the cost of advice has gone up. so in our view the uk experience should be a warning as to the potential of unintended consequences. in response to the panel discussion regarding the comment process and i appreciate that, we are very involved with that and i will make sure to leave
our flavor of the door the next week with another need with the department of labor because we met with him i think a week after the rule did not. we've had multiple media talk to moderate the basic. even while we're discussing his back and forth our team is talking to them about prohibited transaction exemption that have been in the works for years on a regular basis but we had a regular dialogue with people at dol a boom have disagreements. with regard to the comment process and would agree this is only proposal, no question about it it is a luminous complex proposal that is full of fine print in legalese to quote a couple of the panelists which i get a kick out of having trained in economics and finance at have a pair of lawyers being concerned about legalese in fine print, but nonetheless it is a proposal it seem like all sides that needs amending in different ways. we begin it's a lot because we think it is unworkable
particularly the b.i.c. is unworkable as it is. but the problem is we have to take to say ration is in is the absolute statute -- erisa cash that you are either inbound or outbound with significant liability as a result of the. furthermore, you can't the way it operates it's not where mercer mentioned the issue with the principal transactions at the sec come and take your point on this been going on for a long time but it's not a situation where the department can't in a short-term basis if the rule is not right make a short-term correction to then come back and fix it later. it's not right. it doesn't work. you can do to you have criminal liability. you tax liability and you have that until they get around to fixing entering the prohibited transaction extension but as i pointed out we have been in
negotiations with him on prohibited transaction exemption on other rules for years. it takes a long time to move the process. in fact, the point mentioned on the account, the small balanced account and 50000 balanced account, it comes out of the rule that comes out of a 2006 piece of legislation that the rule was written in 2010 and that it took from 20 2010 to now to get a product developer these things can't just be done automatically. i take the point that we're in a comment period we will certainly come. our lawyers are looking forward to writing and a multipage comment letter. many lawyers are, but it's not a situation where we would take the comment income 600 things we had problems with them 198 questions we want answers and then will come out with a 10 page rule and 700 pages of guidance, prohibited transactions and other things
behind. and some stuff for work, some will not but that's it. it's like a statute, that's it. you've got to live with it. that's where the firm said its unworkable. let me just close with this because i think as i said in our view this is not about being for or against the best interest and we believe that has been answered. we are very clear on our position in being in favor of it. i would also point out let me get -- the industry position has been quite clear on that. it is how you do it. in our view the department proposal as drafted goes far beyond such a standard to limit choice and raise costs and unnecessary so in our opinion. equally troubling i think it is this experience underscores a fee if you and the public policy marketplace, something i think a bipartisan policy center is interested in not just in this very but i think across the board. floyd got into this. i think it is the right question
to be asking, particularly in a forum like this. because we are headed, rather than adopting a policy prerogative that will fly across the entire retail market with we're headed in the direction different regimes imposed on the same market participants both investors and providers from different regulators. it is hard to see how investors will not be confused and industries forced to build duplicative and redundant system that will further affect costigan seems illogical we cannot address this in a uniform manner. without i appreciate your time and appreciate the bpc for hosting this event. thank you. [applause] >> thank you, ken. thank you once again floyd and pamela. i'm not sure we have resolve all the issues surrounding the proposed regulation. that really wasn't our intent of this morning. i apologize to those with
questions that we are not able to get to but hopefully we have provided you the audience and the listeners out of their some insights into i underscore, proposed regulation and the development and their goals. and i would encourage all those who are listening and those who are following this to participate in the regulatory process by submitting and getting your views and points into so again thank you for coming out. we appreciate your attendance here this morning. thank you. [applause] [inaudible conversations] >> tonight more booktv in prime time with our coverage of past but festivals from across the country.
i am michael eisenstadt, director of the military security studies bagram at the washington institute here. if i could come before is another word for it ask you all to please turn off your phones so that it doesn't interfere with the event. today's event about having influence in iraq is something which we haven't focus on in a while. the laser narrow focus on the negotiations with regard to iran's nuclear program and the relative lack of attention devoted to development in iraq until the events of june of last year when isis took over large parts of the country have obscured a number of major developments both with regard to iran's regional role and with regard to iran's relationship with iraq that has an important bearing on u.s. interests and american policy towards the region. and let me just give you some examples with regard to i think
on the macro level things that happened since by and large the american departure from iraq in 2011. iraq has gone from a country that come in and after a u.s. invasion in 2003 which followed on the heels of u.s. invasion of afghanistan in 2001 what it looked like from iranian point of view had american armies on the west and east and get the u.s. navy in the gulf your take on from fears of encirclement to practicing encirclement, vis-à-vis israel and in the eyes of many gcc states come on the arabian peninsula with their involvement with the houthis. ..
in order to support their regional allies. and as we may see in the coming weeks, they've gone from a nuclear route to perhaps a country that has a legitimized kind of nuclear threshold status. they are likewise have been dramatic changes in the relationship between iraq and iran. it is ironic one of the goals that with that by the architects of u.s. invasion of iraq in
2003, the hopeless as a result of the invasion the heavy hand, saddam hussein regime would be lifted and once again reemerged as a counter as a series of shiite jurisprudence and that this would undermine the appeal of the concept of clerical rule the official state ideology of iraq. in fact what has happened since then is the other way around. i am large iran has rejected ideological influence particularly in the last year or two in two iraq that was unanticipated. pass, in ways that demonstrate that the arab identity trumped their unit affiliation. the most common example of this
was during the iran-iraq war the iraqi army consisted largely of shiite personnel and suffered relatively few desertion or no faction to the other side during the war. likewise interview polling data that was collected during the course of the u.s. occupation of iraq in the last decade also confirmed that there was a great deal of distance, psychological distance between the overwhelming majority of iraqi shiites in iran. yet we are seeing the change we see perhaps as a partner in response to the emergence of groups like i says in the transnational sunni jihadist identity. voicing out the emergence of the encouragement of iran are they transnational shiite jihadist identity and has a big impact on iraq and shiite identity and potentially long-term implications for iraqi politics. accordingly, we've also seen to
rise up in the creation of humor shiite militias. the u.s. occupation after the defeat of al qaeda in iraq the role was greatly diminished but as a result of isis return we see a resurgence greater than ever before as the shiite militias and they are withdrawing the countries and as i mentioned they have the potential to reshape iraqi province in the form of the hezbollah invasion of iraq as many people talked about here likewise militias are conducting operations with an iranian model which runs counter to the model of the united states has been trained to create iraq the last two years of the professional military security forces which is trained to carry in its competition. functions in a professional
manner in accordance with politics that are inclusive. that is not worked out very well. the u.s. security forces failed last summer when i says cap shared northern iraq and there was hope after the recapture of in part because of the failure of the shiite militia model that is led create a new lease on life. but the failure is of ramadi have called the shiite glacier model and as a result looks like it is here to stay for now. this also potentially long-term implications for the possibility of reconciliation. the final point i want to make at the time the united states withdrew from iraq as a conventional wisdom in certain circles that iranian influence
was seen that the more that iran pushed in iraq the more iraqis would push back. in light of the aforementioned trends i think it is possible is not correct to say significant part interacting in concert with iranian objectives in iraq as well as syria and perhaps beyond and this will have long-term implications for providing influence in iraq. we are very fortunate here to have an excellent panel to discuss these and other issues. will start with first on my right ear fellow at the washington institute, has worked in all of iraq's provinces including iraqi security forces and his most recent publication is the long haul rebooting security cooperation in iraq which is available outside if
you're interested. i second speaker will be phillips might come the terrorism researcher at the university of maryland and is seated in the middle. he is also the author of his blog on the jihads knowledge she websites in his most recent publication through the institute is the report to shiite jihads in syria and its regional effects. a lot of stuff in there about iraqi militias. a very large part of the book is about iraqi militias, iraq you shiite militias. finally we have augmented all he was have augmented ali with an iraq analyst and visiting senior fellow at the education i think where he previously worked as a senior iraq research analyst at the institute for the study aboard and as a research analyst at the washington institute. also one of the co-authors along with myself i'm one of the
pieces of work i am most proud to have participated in. a monograph in april 2001 iran's influence in iraq, countering tehran whole of government approach which i think might be interesting to revisit some of our completions at that time in light of the passage of time and seeing where we stand. anyhow, we have a great panel. no further ado i will turn it to mike and look forward after the presentation to q&a. >> thank you very much. that was 2011 we did that. .2001. slightly less passage of time. it would have been greatly pressured great britain in 2001. okay, thank you very much and thanks to everyone for coming. i won't be talking so much as
the popular mobilization unit sometimes u.s. officials called the popular mobile nation forces. that is really what all three of us are going to talk about. it is to some extent about iran's influence in iraq but very specifically about the new institution that is rising up in iraq that has some old references of new elements trying to debate the significance and that is what i hope we get to by the end of this. i will set the scene a little bit with some basic information on the popular mobilization units from my youth. a couple slides and then philip has a bunch of slides afterwards. for those of you who haven't followed this in great detail, the popular mobilization units were formed in june 2014 after the fall of mosul.
one was issued by ayatollah sistan may come a senior cleric in iraq called the defensive jihads and at the same time we got a government dubai executive fiat the prime minister formed the condition of the prime minister's office, giving this a formal state institution alongside it. so i raised the force is and the government order gave them something to belong to so to speak. is probably not right to say that the militia a correct way of describing as they currently exist. they are part of the iraqi security forces joint demand ba
a very independent actors in the joint command. command and control formerly goes to the prime minister of iraq and the national security adviser is a very significant role command and control. but as we will talk about throughout the day the actual real operational command control of these forces is more complicated. as the commission of the prime minister's office, they have a bucket within the budget of $138 million for financial year 2016. they have a small procurement department and they have enough money to pay on a regular basis about 80000 or more force is about $600 a month. in terms of real command and
control you can see on the slide behind me some of the key individuals. obviously we have prime minister abadi. in the middle you have the recognizable figure of seoul money head of the quds fours from iran who is sitting there on the extreme left of the groups in figures. the other two figures include high the alarm early in the middle who is one of the more senior commanders commanded the better organization forces within the hassett outshot the end to the right we have the israeli administrative chief of forces with a formal position in the commission of the prime minister's office, complicating wrinkle with this guy has since
july 2009 he's been designated global terrorist on the u.s. state department watch list for actions that led to the death of the united states and british and other coalition forces in iraq. we are d.c. one major ring hole in mass. formally entered it the prime minister's office paid for by the iraqi state to some extent but involving guys the u.s. government in particular can't work with peers some elements raised immediately after june 2014 and since then ayatollah sistan day, but other elements operating before that in syria and iraq. previously they thought the bricks and americans in iraq and they just got rolled into this as some of the most combat capable forces within the pm you. subpar popular mobilization, part cover up from a cover-up
for substate is already operating at that meeting by the u.s. and other international partners as terrorist groups. so a dichotomy. these are becoming some of the most muscular politically popular iraq use. some of them very anti-american. this obviously creates a lot of tensions. now it's hard for you to see some of the figures on this. likewise you will be able to see when this is on c-span. they can also put this up on the website afterwards. we have a map here of iraq. louis the kurdish control. green is the federal iraq he contested areas. dark green is where federal iraq
has a firm grip back to june 2014. these are the places they didn't lose. late greed are the areas captured since june 2014 and many of them quite recently. what it is in some of the more important populated areas in iraq which radiate up the river systems as they have done had said the areas where you see the light green areas where the shabby played a critical role in capturing tehran from isis. the formal iraqi army and federal police under a mode the administrative interior are in a defensive posture and they've moved unable to attack, never really recovered from the summer 2014. of the 66th iraqi army are
that i've identified sa only a third of them are capable of undertaking offensive operations at the moment. most of the stronger brigades are in and around bag that city. if you look at combat manpower for% of iraqi combat manpower is there in baghdad city itself. only 45% of the iraqi army in the main offensive theaters right now. and bar where ramadi is. the two main key battlefields. a lot of iraq's combat manpower in the formal security forces is not in the right place necessarily. they can't move to the right place. it is logistically so damaged and saving the security of baghdad right now. what was seen to how she'd
shabby do is be drawn in as a mobile strike force that can provide another 10 to 20000 of high quality and relative terms who can undertake defensive operation. even though the numbers may not strip the security forces what they really do is double the number of capable unit iraq has available to it. i won't go into great detail about operations will just make a couple key points. in june 2014 popular mobilization gave iraq the backbone to prevent bad that sollie further to allow them to quickly stabilize around samarra and began getting right back into counteroffensive operations. likewise the train to tip and range of clearance operations
throughout 2014. a small town up there at the end of the river valley towards pure coke or they start back from areas that overshadow the pilgrim groups and stretching afterwards the iranian border northeast of bag dad and finally were hashd al-shabbi forces played in effect in the rural clearance operations to the east of but didn't do so well when they were required to undertake grinding attrition among combat into creed city itself and eventually they were displaced to some extent by federal security forces backed by the international coalition. they are methodical about clearing operations. these rough tax asked to say the
least. when a player plays it doesn't stay cleared. where does the strength come from? than 60,000 to 90,000 motivated troops, not all of which are on duty at any one time 10 de son 10 de son 10 days off rotation sometimes, not always. particularly in areas where there isn't a tension between shiite and sunni communities. family iranian backed have good support from revolutionary called called cuts force in iraq and lebanese hezbollah are very well armed with drugs and other forms of intelligence support. iranian advisers artillery good lines of supply. backed up by the iranians, all of the things we should be doing on a daily basis. they can take the iraqi army and federal police permissions on
command. so any heavy weapons they can get. they are not in the list. was sold one limits of them for they could not ultimately manage the complex nitpicky battle that needed to be done in the urban area of and they also overstretched. like risk where that is what's happening with security forces. they are undertaking garrison and the colonization operations behind themselves and eventually the combat power is at the period a few more points, mike. what is the non-battlefield if the military impact of the hashd al-shabbi. my colleagues will talk about this i'm sure, but to put my
view, they become a muscular political influence. they have a lot of potential in the future to be arise in fact there in shia politics in the future. to have been in power of hashd al-shabbi and then associated with its successors will be a badge of honor and iraqi politics going forward and do it gave those people is serious business. what are they doing behind the front lines with the colonization operations i'm talking about that is well documented in places like diyala they hire clearing these areas of isil. they are making it difficult to move back in sometimes and they are in some sense purging city administrators from these areas. they may be in some places to permanently change the demographic balance and not is their solution to the insurgency problem they could face.
places like baghdad, they are clashing in some places with idp's. creating security zones around bag dad and other places to protect future pilgrimages and they are clashing with sunni arab and kurdish security forces. not in not all the time but frequently. the second thing they are doing is they are feeling at the terry space in southern iraq and i will particularly if focus on basra. a place i know quite well. not quite headed back to 2006. a terrible time for the city when militias were undertaking chaotic corruption extreme brutality and everything else.
massive corruption in the oil industry. we are not there yet and we may never get there but you can feel the impact of the fact the iraqi security forces have been withdrawn to fight in the north and in many cases over a year now. and the new rising power of the hashd al-shabbi. philip is going to talk about this later but recently to negotiate the setting up of a big hashd al-shabbi recruitment office, administrative office and while he was down there, they ended up kicking one of the other shia parties out of their main office is down in basra. likewise, they have resisted the re-empowerment of iraqi security forces. they didn't want the army when new units were being trained at
nasa rehab. they don't want them to in any way displays the infiltrated police force. likewise, they started to influence some of the more moderate forces within the province. people at writing today fact she hashd al-shabbi related movement. finally, we seem militias starting to in presented things called the oil there. we had one of the senior oil field leaves on one of the reasons that were cited for thoughtless militia influence. my final points or more questions for my colleagues are lining up of my expectations are for today. at the moment we've got to visions of where the hashd al-shabbi will go forward. it could become across sectarian force with lots of sunni elements as well.
it could in some way to interact with the idea of the national guard model. maybe instead he turned the hashd al-shabbi into the national guard rather than demobilizing the hashd al-shabbi into a national guard institution. who knows, we could see as many as 9000 in and by within months. we already have a kinsella had been another places. mark that could have been. this is what prime minister abadi, the u.s. international community, maybe ayatollah has for writeback ago. the other model is perhaps a bit hashd al-shabbi becoming a parallel military and iran. a permanent shia dominated security force that undermines the regular security forces the way the irgc undermined the
iranian army or why lebanese hezbollah has undermined the forces in lebanon. a new parallel army that rejected the model backed by people like heidi all army maliki vice president maliki and a range of other leaders including abu mahdi. i am looking forward to hearing my distinguished colleagues go deeper on these issues and other things they're interested in. what is the future of the hashd al-shabbi. are they under the prime minister's controls are they under the control of the iranian backed terrorist leaders. will they cooperate with each other or compete with each other violently and will this be a positive or negative phenomenon for iraq.
how will the hashd al-shabbi be remembered in the future? thank you. >> all day. i did want to go through a few developments that were coming down. they put the logo over there. kind of based on hezbollah to switch this over time and then we have a fighter from qatar, one of the rising shia militia groups that is quite active with training and growing organizations. i was initially posted this question by what is going on in terms of ethnic cleansing. this has been covered quite a bit and media. a fine job of explaining how the operations work.
this is where we should be focusing on where these things are occurring. for starters the bad dad felt as an important place for where the sunnis have been kicked out and were forced to go elsewhere. i actually do have some maps for this. diyala which borders along with iran and a number of what were wrapped lines early on when america was still occupied part of the country. one of these has been turned into a new road for the holy shrines are located and in addition to that the root going up from bad dad is also another means of where there have been a number of different cleansing. so i got the best comparison for this i like to juxtapose these things to different historical event and it kind of obsessed
with lebanon. the best example of what happened and lebanon from 1975 until 1970. we will see in the back here a big star here. there were certain battles and certain ethnic cleansing and massacres which occurred there. one being encouraged tina a smaller one in napa was living there at the time and helped radical lifespan. a few juxtapose the maps there's a lot of similarities. they are trying to protect important transport routes that are leading from heart and sounds into a urban zones rather important areas and you can see with iraq there have been some examples of days. there have been sending diyala, some claimed the abu ha'aretz.
it encircles this main area, the main capital zones. does it mean that it might go further, that there might be more ethnic cleansing operations , and maybe the battles need to come forward and clear of certain sounds. there is a possibility but right now they are focused on. another question which is supposed is the popular mobilization, are they embracing for standing. a lot of imagery has come out. i put in two of the representatives, one of them who met with abu israel, this kind of lauded commander and of course he's gotten a lot of press and says it's a great iraq hero. this doesn't mean the relationship is all that solid
and also doesn't mean there's not a little monkey business going on. in my discussions with diplomat and many people affiliated with militia groups on the ground there's certain difficulties with sistani peer to sistani is an absolute believer that the better organization fitted. if other groups, almost 150 shia militias. those are just the ones i can count and find. on top of that that the most powerful element that are there, namely that the dire organization these bigger guys are the true believers to push the message is while representing the iraqis. to do so they had to go through a few different things.
they actually put a shot of a humvee being used by the military wing and they have a big trend i've picture on it. i don't know if you're watching cnn yesterday or the day before, but you can see all of the sistani pictures on there. that is cool. sistani not so bad. here's where the problem comes in. the iranians want to co-opt images and co-op personalities of shia clerics. they been doing this since the start. they co-opted sistani in one of the foundational argument they made to send fighters area. they said sistani called saying he would pour shia fighters going over to syria. he's quite supportive. there's quite a few images that they would take was out of context and put it in there and
say you should call up whatever office and join the fight to defend the faith that. i put this picture of how many which is an interesting one for me since he is very anti-iranian on the speeches. it is technically a satirist organization and uses images to push their moves. another development here within sistani's own view, i think he views this as something that's not really going to go away. the imac, also an element that is now essential again the so-called islamic state. what are you going to do? this doesn't mean he hasn't been using this great press and to push certain pressures on them. for instance his initial
thought was called for defensive jihads against the islamic state. they join the iraqi armed forces. he did not come out and said you guys should join the militias. that's a good idea. he didn't do that and he was calm dealing with militia issues. when the representatives of other members of militias, he's had his representatives issue a number of different statement and i keep seeing this repeated is almost a say rate the iraqi flag meaning stop raising individual militia flags, but if the iraqi flag and that day. an interesting thing to note their iraqi flags bathed with hashd al-shabbi on the bottom in the corner with an interestingly hot tip in some ways.
when we look at this, there's a lot of interplay between iranian and sistani without hashd al-shabbi forms that work goes in the future. i am of the personal belief is not all that much they can do in terms of hard force. the iranians have that. they have a lot of money. in terms of pressures to moderate the group, he doesn't have that ability. it doesn't need to be taken into account. i have another site here that goes through some of this where they've been co-opted the imagery. for instance on the right side here you will see this is from hashd al-shabbi's ideological directory. self why they didn't ideological directorates later. they were passing out pictures of sistani put together as if they are fighting the same
cause. in addition to that they actually put up the martyrdom poster and you can see sistani on it along with sadr. this spider was a well-known guy because he dismantled hundreds of ieds. the guy was a master. if you look closely at his uniform, he is wearing a khomeini tab. you kind of know where he's going. there were reports that he was hezbollah and reports he was with mr. interesting how they put the imagery up there and has also done the same thing and they are trampled on it. another question was posed. where's the cross sectarian appeal coming from and beyond that is it true question aren't i tracked this quite a bit.
when i was living in lebanon i saw firsthand what they were engaging christians on the ground and we've seen kind of this broad expansion of the sort of minority alliance being pushed by the iranians and they been doing so by the creation of syria in some cases smaller militia groups. in iraq they've been doing the same thing and putting them under the header of other organizations. they started to groups. one of them is qatar bob lyons focused on chaldeans. this organization is focused on orthodox. in the back where you see those golden eagle underneath the train set in logo is playing to a certain element. let the iranians and what it seems like the other militias are trying to do is play the the
nationalist causes. the identity is very important. you will notice they put this into the simple and it's also a way to recruit people from sweden in europe and other places. they relocated in sweden. so that's been going on. you'll notice the caveat group has a lot of chaldean imagery put in there. i also talk about the shop units. they are a shia minority. they technically have their own language and they've had a lot of problems with the kurds particularly the katie p. this is not all out of altruism and wanted to help search populations. some of it is because they use
this as a blunt force instrument or a threat towards the kurds. fabric routing and orthodox all of which happen to live in curtis and it sends a message. it doesn't mean they're used in a combat form to send the message the iranians and their militia allies have a present that day. i actually attached this image. you will notice the guitar organization said you will know what training is going. in terms of sunni units, as dr. knight said earlier right now the tribes in anbar are very, very angry. the problem is getting supplies to bad, equipping them in a way that will assist in the name offers for back guide to extend control. there's been a lot of problems there. initially come in the sunni units were minuscule up past.
they got a lot of press coverage the smaller poorer tribes easily coerced. sometimes militarily defeated and said okay we will switch over. members were still quite small. hopefully you can see where that goes from there appear another key element that has been going on, the forces within it should be the main focus for people. not the umbrella group itself. the umbrella group is one of many. when i talk about certain groups within it. an organization when after the isp i lost a where they got in a fight with their office in basra. they were also there any kind of says a lot about the timing.
when isci respond to that day said this is the main reason they did this and it was a political move to take out anybody not towing the line goes unspoken for the iranians. and that the belief we may see more of this more sporadically in terms of internal shia difficulties. the biggest issue is dealing with sadr. sadr has not waste his support for initially they jihads in syria. what ended up happening is the iranians were clever and crafty sadr groups, but they didn't have that much loyalty towards them. this caused a lot of problems saying he did support it. because it has occurred once more we have to deal with two main factions which will play
into the iranian difficulty. the first split off from sadr and when it did the iranians to them and formed them into a specialized organization that had nothing but problems with sadr. they tried to call them back and say we can join together, don't worry about it. didn't work out that way. they stayed and follow their own path. though the commander unit ship on the is also a sadr splintered. she was arrested when the occupation was there and was freed as part of an exchange. you can see how the sadrist splinters are exerting pressure.
what happened when the kataib kizballah announced his presence they posted a number of photos holding severed heads and they said we are the actual nasty. now you can see on the patches instead step three. well sadr responded. they have no affiliation. this is another move being made to create fissures with me and i do believe they are doing that right now. there you go. [applause] >> now that everybody is settled, it is good to be with
you. good afternoon, ladies and gentlemen. honored and delighted to be with you. thank you very much. you remind me of the iraq study 2011. it is still very much for that. i look at the issue from multiple directions. my way of looking at it is through field research i was in iraq and kurdistan for a month time period i actually saw them through my on eyes and i talk to individuals to think about these issues come to know about the issues should aim for the last almost decade now. i've been tracking these groups for a long time and there are familiar symptoms that we will see some familiar issues that will up.
you may notice some differences in what i am saying and what you've already heard because you have to look at this from different days. issue at the arena government. there are factors on the ground you have to consider. i will touch on those's based on my research. i want to talk about the questions that michael knights quoted. we do have to talk about it. it is not top about enough. will touch on it in broad terms in the second part will touch on the perspective of the different groups about the train to the popular mobilization unit to sadr by the pm you. all of the units because they're a different days. they have their own view as
well. finally we will talk about the future and i will spend more time talking about that because that is actually an important question. there is a lot we can predict about what the pmu would do based on the last 10 years. it shouldn't be difficult. mike and philip already highlighted some of what is going to happen with the pmu groups. let's start with the iranian government influence. it is at its highest point as it has been since 2003. no question about that. we also have to understand the influence of the iranian government this study from 2011. if you go back, you'll notice we talk about the iranian government in lawrence, we no-space started in 2003. it started in 1991 with the
formation of your commiserations, one of the most prominent components of the iraqi shia groups at the moment. what happened in june 2014 if that is increased for a simple reason. isis was knocking on the doors of baghdad and the iranian government immediately decided to deploy assets. between june and now even the pm you. it is a symptom of the just like the rise of isis that is perceived and real. so you have to think about the iranian government influence from that day. i can tell you i'm almost 24 hour watches for the situation
in iraq. the iranian government officials were there as soon as june 11. think about the u.s. response. it took us two months to actually show the powers that we have. i was one of the most frustrated individuals. we do have good policy at the moment. they allow them to quickly deploy assets. by the way it did not get created. if you go back and look at the mobilization, they reposition their forces and came back to iraq because of the threat of isis. we will actually touch on relayed around. when you look at government
influence as well it has been tough limiting i was today. not since june until now. we have to be very realistic with the iranian government is more accepted as the iraqis now. there is still pushed back and still sensitivities because of the component of iraqis and iranians. i can tell you there are more iranians. that did not make a lot of iraq is happy. i don't just go to a hotel and go from one meeting to another. i'm free to walk around and talk to individuals. there was, even the presence of iran there was some sensitivity and not moving forward will display itself in a major way
that could be beneficial for the united states. that is one part. what i want to talk about is what do people think about the pmu from all the component. if many iraqis are watching today online at the moment are online later around my favorite channel, c-span. if they've seen the presentations, i think they will have a simple reaction, which is we don't have the luxury to think about the strategic angles and strategic issues and look that far away. the issue for the iraqi sunnis and how they have been interacting with the pmu. this is more essential. it's very simple. when i was in air bill in august
august 2014, the role of the passion or gaia i felt protected and i wasn't concerned, but i felt more protected and didn't think about the u.s. airstrikes and what what they will mean in the future. i thought this was the relief i needed and everybody else on the ground was relieved as well. this is not a strategic issue. i don't disagree with my colleagues about the hashd al-shabbi or what the pmu want to do. it is clear this group many of the formations have ambitions about what to do in the future and they are not good for u.s. policy or for iraq either. but there is an appreciation. i would say i will start with
the iraqi shia. a very simple war than an average iraqis told me when we are talking about i says were very simple. we are targeted because we are shia. and not to an extent is how they feel about i says msn 10. it's a matter of protection for them. it is important. as the pmu unifi among themselves, so many pieces of evidence from what philip provided and what might talked about the pmu have differences among them. you have that big a groups that are more dominant in manpower
more dominant in the weapons equipment, ambition tied to the iranian government as well. but then you have either component but are not completely tied to the iranian government. it does have its groups that it is supporting and working with. in fact many of you may remember in april of this year when the government made it a condition not to engage in tikrit and some non-iranian backed groups get involved. there were a number of groups have stepped in. they are not part of the iraqi military. they do have names. they are present and in social media they are present in many
ways. when they went back after the operation they received them and there was an hour-long video of the reception they got. because of the differences there will be competition among them. of course, if you go across and say look at the iraqi sunnis come it will be very unfair and very unrealistic to say about the pmu because they don't. in fact just like i quoted an average iraqis to you another from another province, predominantly iraqi sunni. his words were simple. i disagree with that.
i don't think they are the same. i says is to disintegrate iraq and dismember iraq. as much as they have been in ashamed, from my perspective they are different. that is why people are concerned about. however, you have to bring it back to the issue of survival and existential threat. when the area in southern studying and north of baghdad province an area predominantly does have sunni tribes. mostly djibouti tribes. i saw that they are for a very long time. that area was not taken back until the pmu supported the role as well. that is the iraqi security forces. what you saw is the pmu had a
different reaction with regard to the treatment. we have to point that out. the treatment of the population was better. from their perspective in fact i remember immediately after it was clear. we haven't seen the same report a violation in those areas. we do have to be fair. this morning i did see report from the tribal leaders saying we are not getting it from the iraqi government. it is also pointed out that people are saying the same thing. but those groups do have to give support. the same thing happened when it was cleared a step to create they made it a point to show
executions of the djibouti tribe and they cut off the heads of the most prominent of the djibouti tribe. they offered a different dynamic from the hashd al-shabbi from the pmu and how the components deal with the population. there is still a concern and we have to be comprehensive. there is a concern that is clearly a priority for the groups to secure. there is a concern about the out of, the frontline of the sectarianism in iraq. i think the armed groups a lot of times at the end of the day you do have a lot of iraqi sunnis. not a lot, but because of the necessity and need they sometimes do call him a pm you
and they have to work with the pm you. as much as i iraqis don't get along. let's talk about the iraqi coors and a dynamic as you don't have a lot of iraq's shiite and northern iraq. but you do have them in certain areas. i still attract the military campaign on a daily basis. i do anticipate for northern iraq particularly the end western in a while. that is predominantly iraq's shia. they have made this my decision not to engage in areas that they feel they've won't be welcome. the iraq's sunni tribe as we have seen still have a lot of work to be mobilized, to be enforced. the only choice with the the pm you about the extent did by the
iraq government and there will be an understanding between the baghdad government about what should happen because that already have been as mike mentioned. i like to refer to mike is one of the most influential people. the peshmerga do not want to engage because that's a predominantly iraq's shia. from that the limitation i think as we think about it having said that i'll talk about strategy in the future. but i will talk about the first thing. while the pmu exists. the simple answer is yes. all of the components have become a fact of life in iraq.
they do recruit. philip, for your own amusement -- [inaudible] >> but they do exist. they will be part of the political structure. i am not so confident they will be 10 feet tall however particularly on the political front because all of these groups, they are normal groups. they have competed in elections before. for those of you who have forgotten that the elections just a few years ago hashd al-shabbi had an edge. hezbollah, all of those groups competed and they did not do very well. we have to be realistic.