Despite the fact that the House is poised to pass a bill Tuesday to hinder the Department of Labor’s rerelease of its fiduciary rule, the primary architect of the rule, Phyllis Borzi, said the same day that “it is entirely possible” that the reproposal could be at the Office of Management and Budget by year-end.
“We are coming very close to finishing our work” on the re-proposed rule, Borzi, assistant secretary of Labor for the Employee Benefits Security Administration, told attendees at the American Society of Pension Professionals and Actuaries' annual conference in National Harbor, Md., just outside Washington.
The “conflicts of interest rule,” she continued, is DOL’s “highest priority.”
Indeed, OMB released a statement Monday that President Barack Obama’s senior advisors would recommend that he veto H.R. 2374, the Retail Investor Protection Act, introduced by Rep. Ann Wagner, R-Mo, which would require the DOL to wait to repropose its fiduciary rule until 60 days after the Securities and Exchange Commission issues its fiduciary proposal under Section 913 of the Dodd-Frank Act.
While the Republican-controlled House “will likely pass” Wagner’s bill, Borzi told ThinkAdvisor after her remarks, “we’re a long way from having a law.”
Said Borzi: “My job is to get my work done.”
OMB said that the administration “strongly opposes passage of H.R. 2374 because it would derail important rulemakings” underway at the SEC and DOL “that are critical to protecting Americans’ hard-earned savings and preserving their retirement security.”
H.R. 2374 “prohibits Labor from issuing a rule to protect investors until the SEC engages in and completes further study of the effect of a rulemaking on retail investors," OMB said. "The bill ignores the fact that significant work has already been conducted in both agencies and that the agencies have included and continue to include the public, industry and numerous stakeholders in their rulemaking processes.”
The two agencies, OMB continued, “are already working closely to avoid conflicting requirements for the regulated community, and this legislation would hamper effective coordination between the two agencies. The bill would hinder efforts to protect consumers from conflicts of interest among brokers, dealers, financial advisors, and others whose incentives may be misaligned with investors, potentially leading to deceptive and abusive practices.”
OMB has a minimum of 90 days to review DOL’s rule. However, as Borzi stated during her comments at the ASPPA event, the recent 16-day government shutdown “was a long time for those of us involved in government,” and a “backlog has accumulated in a wide variety of activities, including at OMB.”
H.R. 2374 passed the House Financial Services Committee by a 44-13 vote in June.
One industry official told ThinkAdvisor that Wagner’s legislation may not die in the Senate, “especially if it gets strong bipartisan support in the House.” Support for such legislation in the Senate, however, is unclear.
Wagner said in her Sunday video message that her bill would “prohibit the DOL from issuing any new rules unless the SEC acts first,” and require the SEC “to perform some common-sense due diligence to determine whether any new rules are necessary.”
Said Wagner: “When federal agencies overreach, as they have in this case, it’s the responsibility of Congress to intervene and stand up for hardworking American families who ultimately pay the price for misguided regulations.”
Chris Paulitz, spokesman for the Financial Services Institute, said that Wagner's bill "sends yet another message to the Department that many in Congress are concerned about the rule’s impact on retirement advice for small investors." FSI, which has been a staunch opponent of DOL's fiduciary rule, is “working to ensure that the Department of Labor’s rule proposal doesn’t limit access to quality, affordable advice for middle-class Americans, [which is] our top priority."
Borzi noted at the ASPPA event, as she has previously, that the reproposed rule — which is a redraft of the one pulled by the department in 2010 — will include three parts: the text of the reg; the preamble explaining “why we are doing this”; and an “extraordinarily robust” economic analysis.