The Department of Labor’s rule to amend the definition of fiduciary on retirement accounts is a “runaway train,” and the recent White House memo supporting release of the DOL redraft is “thinly veiled propaganda designed to generate support for a widely unpopular rulemaking,” SEC Commissioner Daniel Gallagher said Friday.
Speaking at the Practising Law Institute’s SEC Speaks conference in Washington, Gallagher argued that the DOL fiduciary rule is based on “the premise that an entire SEC-regulated industry is plagued by conflicts of interest,” a premise “that, despite the white-hot intensity with which it is posited by its proponents, has nowhere been proven.”
Said Gallagher: “I have not seen the [DOL's] reproposal. And given the SEC’s comprehensive oversight authority with respect to the investment advisors and broker-dealers who would be impacted by it, you might find that curious.”
SEC Chairwoman Mary Jo White told reporters after her early Friday morning remarks at the event that the SEC is providing “technical assistance” to the DOL regarding its rulemaking. White said she would be providing insight into her position regarding a fiduciary rulemaking by the SEC in the “short term.”
However, Gallagher stated in his remarks that “despite all the work the SEC staff has undertaken on” the subject of putting brokers under a fiduciary mandate, “not to mention the Commission’s decades of history in regulating broker-dealers and investment advisors and overseeing their disclosures relating to conflicts of interest, the DOL has not formally engaged the Commissioners, at least not this Commissioner, on its fiduciary rulemaking process and the impact it may have on investors.”
Despite public reports of “close coordination between the DOL and SEC staff,” regarding the fiduciary rules, he continued, “I believe this coordination has been nothing more than a ‘check the box’ exercise by the DOL designed to legitimize the runaway train that is their fiduciary rulemaking.”
Gallagher argued that if DOL “sticks with its approach to ban or effectively ban conflicts, entire categories of products and services that are now available to investors could disappear.”
He challenged the White House memo’s assertions in four areas.