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Regulation and Compliance > Federal Regulation > DOL

GOP Lawmakers: DOL Should Wait Its Turn on Fiduciary

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The Securities and Exchange Commission, not the Department of Labor, should lead the way on fiduciary rulemaking for BDs, two Republican lawmakers said in a letter Tuesday.

The chairmen of the House and Senate Appropriations Subcommittees on Financial Services and General Government told Shaun Donovan, director of the Office of Management and Budget, in a Tuesday letter that the Department of Labor’s attempt to redefine fiduciary on retirement plans before the SEC decides how it will proceed will lead to “inconsistent and overlapping” regulatory requirements for brokers.

The two lawmakers, Sen. John Boozman, R-Ark., and Rep. Ander Crenshaw, R-Fla., told Donovan that the SEC should “move first” in releasing a rulemaking as Section 913 of the Dodd-Frank Act “clearly designated the responsibility of developing a uniform fiduciary standard of care for broker-dealers and investment advisors” to the SEC. “Despite that fact, the DOL has moved forward to expand its own fiduciary standard” under the Employee Retirement Income Security Act.

The OMB, part of the White House, is reviewing DOL’s proposed fiduciary redefinition.

Rep. Ann Wagner, R-Mo., reintroduced her bill on Feb. 25 to require the DOL to wait to repropose its rule until the SEC issues its own fiduciary rulemaking.

SEC Chairwoman Mary Jo White said Feb. 20 that she would speak about her position regarding a rule to put brokers under a fiduciary mandate “in the short term,” stating that it remains a priority of hers “to get the Commission in a position to make that decision” on such a rule.

The “cumulative effects” of SEC and DOL fiduciary rulemakings, Boozman and Crenshaw write in their letter, “will lead to inconsistent and overlapping regulatory requirements that increase investor costs and reduce access to investment advice.” For that reason, the lawmakers state, “the SEC should move first in any rulemaking in order to address issues of investor harm and confusion surrounding different standards of care.”

The lawmakers also say they believe the DOL rule “will significantly harm low- and middle-income investors seeking financial advice regarding their retirement and will cause unintended consequences to many American’s IRA accounts by limiting access to investment advice provided to many smaller accounts.”

Given the “concerns raised” in DOL’s initial 2010 proposal, which DOL pulled, the lawmakers said that DOL should allow for a 90-day public comment period.  

But Dennis Kelleher, president and CEO of Better Markets, told ThinkAdvisor in an email message Wednesday that Boozman and Crenshaw’s letter “is more of the same spin we’ve seen from industry trying desperately to prevent the proposed rule from being released to the public.” The letter includes “wild speculation about the rule” and “is baseless because no one has seen the rule yet. All DOL proposes to do is release the rule to the public for comment so that there can be an informed debate.”

Added Kelleher: “Forcing the DOL to wait for the SEC to act is just a delaying tactic that will leave Americans trying to save for retirement victims of conflicts of interest for many more years. Public officials should be demanding that DOL release its rule immediately so that an informed, public debate can begin and the American people can see for themselves who is acting in their best interests.”

The U.S. Chamber of Commerce said Tuesday that it’s prepared to use this year “every tool” it can — including lobbying Congress — to voice its concerns about DOL’s fiduciary redraft.

David Hirschmann, president and CEO of the Chamber’s Center for Capital Markets Competitiveness, said on a Tuesday call with reporters that the SEC is “the primary regulator” regarding fiduciary duties, and that the Chamber “doesn’t want DOL creating another regulatory approach.”

He said “all the players” in this fiduciary space — DOL, the SEC and the Financial Industry Regulatory Authority — should collaborate “on what the system [for fiduciary advice] should look like. But that’s not what’s happening here — DOL wants to expansively act” on its own by releasing its fiduciary redraft.

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