SEC official calls White House memo on broker rules ‘propaganda’

Gallagher said mishandling customer accounts is already disallowed under current regulations. The memo "blatantly ignores this comprehensive regulatory oversight," he said.

"Indeed, the memo manages to avoid even mentioning the SEC at all," he added.

The Labor Department has pressed to update its rules, which were issued in 1975. At that time, many workers had employer-controlled pensions and the 401(k) didn't exist. Now, tens of millions of people have their savings in 401(k) plans and individual retirement accounts, known as IRAs, which together hold more than $11 trillion.

Requiring brokers to act in the best interest of customers, known as fiduciary duty, would provide "meaningful protections" to investors, according to Furman's memo. Under current rules, brokers are held to a lower standard, which requires them to believe their recommendation is suitable for a customer.

Gallagher said he hasn't seen the Labor Department's proposal, which is expected to be filed with the White House's Office of Management and Budget next week. He said the SEC's rules for brokers aren't perfect but the subject is much more complicated than how the White House portrays it.

"It's easy to shout about conflicts of interest and vilify any potential practices that involve them, even if it means taking entire swathes of investment products off the table," he said.